Australia 2030 Prosperity Through Innovation Full Report

Australia 2030
Prosperity through
A plan for Australia to thrive in the

global innovation race
Innovation and
Science Australia
Australia 2030
Prosperity through
A plan for Australia to thrive in the

global innovation race
© Commonwealth of Australia 2017
ISBN-13 978-1-922218-02-5 (print)
978-1-922125-48-4 (online)
Citation
Innovation and Science Australia 2017, Australia
2030: prosperity through innovation, Australian
Government, Canberra.
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Foreword
many inventions; the black box flight recorder,

heart pacemaker, photovoltaic cells, X‑ray
crystallography and many others were all based
on Australian research breakthroughs, but
commercialised overseas.
Looking towards 2030, innovation will be
integral to the expansion of Australia’s economy,
keeping its workforce strong, and addressing
societal challenges. Australia will need to be
competitive in a global innovation race by
scaling up more high‑growth industries and
companies; commercialising more high‑value
products and services; fostering great talent;
and daring to tackle global challenges.
This year, Australians became world record Yet just at the time when Australia needs to
holders thanks to our 26 years of continuous accelerate its innovation performance, we are
economic growth.1 falling behind our global peers, particularly in
student performance in science and mathematics,
Much of this growth has been underpinned by and in business investment in research and
two of Australia’s traditional, big export sectors: development. This is more than a canary chirp
agriculture and mining. Although a significant in our economic mineshaft: it is a clarion call for
natural resources endowment provided the national action.
foundations to build on, it was extraordinary
innovation, risk-taking and export success that Recognising the importance of innovation for
led farmers and miners to their world-leading Australia’s future, the Australian Government
positions. established the Innovation and Science Australia
(ISA) Board in 2016, made up of 15 entrepreneurs,
Such innovation runs through Australia’s investors, researchers and educators with
history. Australia’s tyranny of distance made extensive local and global experience. The board
inventiveness a necessity for early colonists, was asked to produce a strategic plan to advise
inspiring the stump‑jump plough, which enabled policy makers on how to accelerate innovation
broad‑acre farming, and refrigeration, which and optimise Australia’s innovation system out
allowed meat to be exported. Over the last to 2030.
century, Australia has produced 15 Nobel Prize
winners, mostly for knowledge breakthroughs The ISA Board is confident that Australia can
in medicine and physiology.2 However, Australia become a top‑tier innovation nation by 2030,
has also failed to capture the full value of our and retain its record‑breaking economic streak.
Australia 2030: prosperity through innovation
1 Australian Trade and Investment Commission 2017. Invest in Australia: benchmark report, ATIC, Canberra,
<https://www.austrade.gov.au/International/Invest/Why-Australia/Growth>.
2 National Library of Australia 2016. Australian Government Web Archive: Australia’s Nobel Laureates and the Nobel Prize, NLA,
Canberra, <http://webarchive.nla.gov.au/gov/20160615234745/, http://www.australia.gov.au/about-australia/australian-story/
australias-nobel-laureates>; Australian National University 2017, ‘Research achievements: Professor John Harsanyi’, ANU, Canberra,
<http://www.anu.edu.au/about/awards-achievements/research-achievements/professor-john-harsanyi>.
iii
(the 2030 Plan) makes 30 recommendations for
governments to help achieve this goal, including
ISA Board
launching a landmark National Missions program • Dr Alan Finkel AO (Deputy Chair)
to inspire innovators, progress solutions to big • Dr Bronte Adams AM
problems, and generate national passion and • Dr Michele Allan
pride in innovation and science achievements.
• Paul Bassat
Creating the 2030 Plan was only possible with the • Dr Rufus Black
input of multiple contributors and stakeholders,
• Maile Carnegie
especially my incredible board of experts, along
with our CEO, Dr Charlie Day and his team. I thank • Beth Comstock
them all for the lessons and insights from their • Scott Farquhar
own successes and failures, which enabled us • Professor Bronwyn Harch
to blend our practical experience with the strong • Dr Marlene Kanga AM (Special Advisor)
evidence base developed for this report.
• Daniel Petre AO
On behalf of the ISA Board, I present the 2030 Plan • Dr Christopher Roberts AO
and commend its findings and vision for the future.
• Saul Singer
• Dr Heather Smith PSM (Ex Officio)
Bill Ferris AC
Chair Supported by Dr Charlie Day, CEO, and the Office
of Innovation and Science Australia
3 November 2017
iv
Contents
Foreword iii
Executive summary 1
Section A: Australia’s innovation opportunity 7
Vision for Australia in 2030 8
Section B: Five imperatives for action 25
Imperative 1
Education: Respond to the changing nature of work by equipping all
Australians with skills relevant to 2030 26
Imperative 2
Industry: Ensure Australia’s ongoing prosperity by stimulating high-
growth firms and improving productivity 38
Imperative 3
Government: Become a catalyst for innovation and be recognised as a
global leader in innovative service delivery 57
Imperative 4
Research and development: Improve research and development
effectiveness by increasing translation and commercialisation of research 74
Imperative 5
Culture and ambition: Enhance the national culture of innovation by
launching ambitious National Missions 85
Section C: Roadmap for action 95
Funding, implementation and monitoring 96
Summary of recommendations 101
Appendices 107
Appendix A: Other National Mission candidates 108
Appendix B: Definitions and sources for the scorecard metrics 110
Acronyms, abbreviations and glossary 114
Acknowledgements 116
v
Executive summary
Australia is in a $1.6 trillion global innovation • Section C proposes a roadmap for action to
race,1 where the prize at stake is a bigger share implement, and measure progress against the
of global wealth, better jobs, and the best access 2030 Plan, and includes a complete list of the
to the products of innovation, such as new recommendations.
health treatments.
Australia has entered the race from a good
position due to our strong economy and Innovation will shape
established research strengths, but we lag opportunity in Australia
behind our competitor nations in the amount
we invest in innovation, and in the level of our
by 2030
ambition. We need to accelerate our pace now to Innovation is essential to create more economic
catch the leaders of the innovation pack, or risk and social opportunities for Australians by 2030.
falling further behind. With the resources investment boom easing, and
Recognising Australia’s innovation imperative, our population ageing, Australia needs to find
the Australian Government launched the new sources of growth and improve productivity
National Innovation and Science Agenda (NISA) to maintain our standard of living. The biggest
in 2015. It provided an immediate boost to growth opportunities will come from knowledge-
Australia’s innovation capabilities, and created intensive companies that innovate and export,
a long‑term, strategic investment framework by as they are the most profitable, competitive and
establishing Innovation and Science Australia productive. These companies will increasingly
(ISA) with an independent and expert board. need to solve global problems at scale. When
ISA was tasked with undertaking a performance they succeed, they will make a substantial
review of Australia’s innovation system, and contribution to new jobs growth in Australia.
developing a strategic plan to 2030 advising This will come through both direct employment
policy makers on how to optimise investment in and indirect jobs throughout the economy from
Australian innovation. companies in their supply chain or in the service
economy for their workers.
ISA’s 2030 Plan is made up of three sections:
Innovation will also be critical to the employment
• Section A explains the vision, need and
market in Australia in 2030. Despite present
opportunity for Australia to improve its
fears about automation eradicating jobs, by
innovation and science performance by 2030.
2030 a shortage of workers is a more likely
• Section B identifies five imperatives problem than a shortage of jobs. Australia’s
for action where governments can ageing population means a retirement boom is
catalyse more investment and activity; looming, which will create a 6 per cent shortfall
strategic opportunities and actionable in the number of workers needed to maintain
recommendations are discussed for each current gross domestic product (GDP) growth
imperative. in 2030.2 Innovation and digital technologies
1 Organisation for Economic Co‑operation and Development 2015, Main statistical indicators: gross domestic expenditure on R-D by
sector of performance and source of funds, OECD, Paris,
<http://stats.oecd.org/OECDStat_Metadata/ShowMetadata.ashx?Dataset=GERD_FUNDS&ShowOnWeb=true&Lang=en>.
2 Blackburn, S, Freeland, M & Gärtner, D 2017, Digital Australia: seizing opportunities from the Fourth Industrial Revolution,
McKinsey&Company,
<https://www.mckinsey.com/global-themes/asia-pacific/digital-australia-seizing-opportunity-from-the-fourth-industrial-revolution>.
1
such as automation will help fill Australia’s – from genomics, to data analytics and
future labour gap, by improving productivity and materials science – will enable breakthrough
performing tasks workers do not want, or need, discoveries. This will span areas as diverse as
to do. personalised health care, disaster management,
and energy and transport solutions. Australia
In addition, the types of jobs available, the
is at the forefront globally of many of these
skills needed to do them, and the length of
opportunities, aided by significant government
employment will change. Automation will
investment in research and our world‑class pool
continue to replace some manual, routine tasks
of researchers. This work will have a profound
performed by workers, disproportionately
impact on Australian lives. It means by 2030, for
affecting traditionally strong sources of
example, the 650 Australian children diagnosed
employment, such as drivers and clerical
with cancer each year are more likely to receive
administrators. Simultaneously, technology
potentially life‑saving personalised treatment.4
will create new roles in fast‑growing fields like
professional and technical services. The skills
people will need to do their jobs will also evolve;
92 per cent of future jobs will need digital skills, Australia’s innovation
and 45 per cent of jobs will need people who imperatives
can configure and work confidently with digital
systems and technology. More jobs will demand Australia should be confident, but not
21st‑century skills, such as interpersonal skills, complacent, that we can be at the forefront
entrepreneurialism and hypothesis-based of the global innovation race and reap the
problem solving.3 People will also change jobs opportunities this brings. We have a strong
more frequently. An Australian student leaving economy, and have shown we can launch
school today is likely to have five careers and globally successful companies in new, high-
17 jobs over their working life. growth industries. This includes Cochlear Ltd and
ResMed in medical devices, CEA Technologies
Education and outlook will determine how in advanced radar, Austal in high-speed ferries
well Australians adjust to these new work and ships, Marand Precision Engineering in
opportunities. Every Australian child should advanced manufacturing, and Atlassian in
have access to a world‑class education to give software. Our services sector, which employs
them the best start in life. That education must 80 per cent of all Australians, has a robust track
include a foundation of core and 21st‑century record of creating plentiful high-value jobs.5 And
skills, a progressive accumulation of knowledge Australia has repeatedly demonstrated we can
in subjects such as maths to maximise the create game-changing inventions such as the
choice of advanced subjects in later study, world’s first cancer vaccine, Gardasil.6
and a motivated learner’s mindset. Existing
workers will depend on the education system However, to realise future opportunities in
to help them retrain and upskill more often to Australia, we need to make Australia one
win well‑paid jobs and smoothly navigate career of the best places in the world in which to
transitions. undertake innovation, science and research,
and to maximise the spread of benefits to all
Innovation will also change Australian’s lives Australians.
for the better by 2030. Advances in technology
3 McCrindle 2014, Job mobility in Australia, McCrindle, Sydney,

<http://mccrindle.com.au/the-mccrindle-blog/job-mobility-in-australia>.
4 Cancer Australia 2016, About children’s cancer: statistics, Australian Government, Sydney,
<https://childrenscancer.canceraustralia.gov.au/about-childrens-cancer/statistics>.
5 Lowe, P 2017, The labour market and monetary policy, address to the Anika Foundation luncheon, Reserve Bank of Australia,
Canberra, <http://www.bis.org/review/r170810d.pdf>.
6 Australian Cancer Research Foundation 2006, World’s first cervical cancer vaccine becomes available, ACRF, Sydney,
<https://home.cancerresearch/worlds-first-cervical-cancer-vaccine-becomes-available/>.
2
ISA’s vision, captured in the 2030 Plan, is to help influence to accelerate Australia’s performance
Australia thrive in the global innovation race. by 2030 (Figure 2).
This will place Australia within the top tier of
Innovation, science and research will offer
innovation nations, and unlock economic and
Australia abundant new economic and social
social opportunity.
opportunities by 2030, but we are in a global
To frame its strategy, ISA has identified five race to realise them. To give Australia the best
urgent imperatives for action across the odds of success, we need to act now to execute
innovation system in Australia (Figure 1). a plan to stimulate further investment in
Australian inventiveness and ambition, to enable
Within these imperatives, the 2030 Plan
Australia’s creators and risk-takers to thrive, and
describes specific opportunities where
to ensure all Australians benefit from the best
governments can exercise leadership and
that human ingenuity offers.
Figure 1 Five imperatives for the Australian innovation, science and research system
R&D = research and development

Source: Design by ISA.
3
Figure 2 Overview of the 2030 Plan
Imperatives Strategic opportunities for government Recommendations
Education • Teaching of science, technology, engineering and mathematics 1 to 5

and 21st-century skills can be improved through development
Respond to the for teachers and school leaders, and education inequality can be
changing nature of reduced through targeted interventions
work by equipping
• Australia’s vocational education and training system can be made
all Australians with responsive to the new priorities presented by innovation.
skills relevant to
2030
Industry • Business research and development investment can be increased 6 to 10

by better targeting the Research and Development Tax Incentive
Ensure Australia’s program, and increasing support for direct grant programs that
ongoing prosperity target national priorities
by stimulating
• The growth of export firms, particularly young high-growth firms,
high-growth firms can be encouraged by increasing Export Market Development
and improving Grants funding, and by expanding and making better use of trade
productivity agreements
• The opportunities presented by the ‘fourth wave’ of the internet can
be captured by strengthening Australia’s digital economy
• Business productivity in all sectors can be facilitated by healthy
levels of competition
• Access to global talent pools can be improved by maintaining
flexibility in skilled immigration rules, and increasing the profile of
Australia as an attractive destination for business builders.
Government • A flexible regulatory environment that supports innovation could be 11 to 18

achieved through collaboration between Australian governments
Become a catalyst
• Investors can be encouraged to pursue opportunities that generate
for innovation and
both financial and social returns
be recognised as
a global leader in • The use of open data would be accelerated by improving access
and usefulness
innovative service
delivery • National innovation can be stimulated by using government
procurement as a strategic lever
• Australia’s innovation investment and talent can be strengthened
by improving access to global talent pools and fostering greater
gender and ethnic diversity.
Research & • Industry–research sector collaboration could be increased 19 to 26

development by introducing a collaboration premium in the Research and
Development Tax Incentive program
Improve research
• Institutional support for commercialisation could be increased
and development
by establishing a dedicated stream of funding for translational
effectiveness activities
by increasing
• Maintaining Australia’s high-quality research will require continued
translation and
investment in national research infrastructure, commencing with
commercialisation the nation’s high-performance computing facilities
of research
• Making the most of available research talent would be facilitated
by promoting greater diversity in the research and innovation
workforce
• The growing momentum in Australian venture capital would be
supported by taking measured and consultative approaches to any
intervention
Culture & • A Genomics and Precision Medicine National Mission will be an 27 to 30

ambition ideal first mission, delivering health and innovation benefits for all
Australians
Enhance the
• Ensuring Australia’s National Missions are effective can be
national culture
achieved through the development of a robust framework to
of innovation by identify and implement missions.
launching ambitious
National Missions
4
6
Section A:
Australia’s
innovation
opportunity
Vision for Australia in 2030
Innovation and Science Australia’s Australia in 2017

vision for 2030 is that Australia
Australia in 2017 has much to celebrate. We have
will be counted within the top tier experienced 26 years of continuous economic
of innovation nations. We will take growth, and have a high standard of living. Our
pride in our global reputation for gross domestic product (GDP) per capita growth
excellence in science, research and over the last 20 years is double the average for
the Organisation for Economic Co-operation and
commercialisation.
Development (OECD).7 Our economy is diverse,
with globally competitive tradeable sectors,
Our world-leading strengths in
especially in traditional industries such as
innovation, science and research will mining,8 and a thriving domestic economy with
benefit all Australians through: almost 80 per cent of jobs in service industries.9
• strong economic growth We have built this prosperity while remaining
a comparatively equitable society. Our strong
• competitive industries and economy has created good jobs for most
companies, and collaborative Australians. Our unemployment rate has been
education and knowledge less than 6.5 per cent for 16 years, and around
institutions 1 per cent lower than the OECD average over
the last 10 years.10 There has been consistent
• plentiful jobs that are meaningful growth in high-paid and high-value jobs,11 and
and productive we rank well in annual wage levels in comparison
to OECD peers.12 We are second globally on the
• a fair and inclusive society with a OECD Better Life Index, and in the top quartile
high quality of life. for education, community and jobs.13
Australia 2030: prosperity through innovation
provides the roadmap for governments to
accelerate Australia’s innovation system and
achieve this vision by 2030.
7 World Bank 2016, GDP (current US$), World Bank open data, World Bank, Washington, DC,
<https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?view=chart>.
8 McKinsey analyses based on Australian Bureaus of Statistics and IHS Markit data.
10 Organisation for Economic Co-operation and Development 2017, OECD labour force statistics 2016, OECD, Paris,
<http://dx.doi.org/10.1787/oecd_lfs-2016-en>.
12 Organisation for Economic Co-operation and Development 2017, OECD labour force statistics 2016, OECD, Paris,
<http://dx.doi.org/10.1787/oecd_lfs-2016-en>.
13 Organisation for Economic Co-operation and Development 2017, Better Life Index, OECD, Paris, <http://www.oecdbetterlifeindex.org/>.
8 Section A: Australia’s innovation opportunity

While our natural resource endowment is widely it. Many of these countries are leveraging digital
recognised as a key driver of our prosperity, technologies to build global-scale activities
we have also been steadily building up our faster than we are.
innovation and science assets. Our education
Australia will need to increasingly look to its
sector is now a global export leader.14 Our
innovation system to help navigate this new
healthcare system and medical researchers are
future. Major economic and social shifts – such
world class. Our companies and consumers are
as an ageing population, growing demand for
rapidly adopting digital technology, including
health services, and changing employment
in the mining sector, which made a major
and skills needs – will challenge us to find new
investment in innovation and automation during
sources of productivity and growth.
the resources investment boom.
A number of themes in particular will shape the
This investment in innovation is timely. Australia
future landscape that our innovators will help us
has moved from a once-in-a-century mining
to create and to navigate.
boom to a global innovation race, where
intellectual property (IP) is at least as valuable
a resource as iron ore. This is a big shift for our Productivity will determine our future
country. At the same time, we are navigating a prosperity
set of social and technological shifts that are
reshaping our economy, jobs and quality of life. Australia has benefited from a favourable move
in its terms of trade during an expansionary
Our innovation system has started to adapt to
period in its exports of commodities. However,
these changes, but we are falling behind our
this contribution to national income growth
major competitor nations in the amount we
is now forecast to be –0.5 per cent until 2025
invest and the level of our ambition. We need
(Figure 3).15
to accelerate our pace now to catch the leaders
of the innovation pack, or risk falling behind. Australia must offset the impact of this expected
Australia can prosper as successfully in this next decline in the terms of trade by developing
era as we have done in the past, but we need to new sources of export income and improving
plan and act for a new future where we will need domestic productivity and growth, to improve
to deepen, and draw down on, our innovation, GDP per capita by 2025.
science and research strengths. Employment growth, which has historically been
a major driver of long-run GDP growth, cannot be
relied on for future growth. Australia’s workforce
Realising future opportunities size is peaking due to an ageing population
Technology, science and innovation are and retirement.16 Australia already takes a high
creating incredible new economic and social number of migrants, and a higher proportion of
opportunities for Australia. These offer a skilled workers through immigration programs,
tantalising glimpse of a bright future, but we compared with other developed nations.17 Like
are in an intense innovation race with other other developed countries, Australia faces
developed and developing countries to realise a shortage of full-time workers if we want to
maintain per capita GDP at current levels – with
14 Australian Government Department of Foreign Affairs and Trade 2016, Australia’s trade in goods and services, DFAT, Canberra,
<http://dfat.gov.au/about-us/publications/trade-investment/australias-trade-in-goods-and-services/Pages/australias-trade-in-
goods-and-services.aspx>.
15 Australian Government 2015, Budget Paper no. 1: budget strategy and outlook 2014–15, Statement 4, Australian Government,
Canberra.
16 Australian Institute of Health and Welfare 2017, Older Australia at a glance, AIHW, Canberra, <https://www.aihw.gov.au/reports/older-
people/older-australia-at-a-glance/contents/demographics-of-older-australians/australia-s-changing-age-and-gender-profile>.
17 The Economist 2017, Australia admits more migrants than any other big Western country, <https://www.economist.com/news/
asia/21730004-and-australians-still-them-australia-admits-more-migrants-any-other-big-western-country>.

Figure 3 Sources of growth in national income, 1960s to 2025
Note: Contributions to income growth 2013–15 are consistent with the forecasts in the Budget statement.
Sources: Australian Government 2014, Budget Paper no. 1: budget strategy and outlook 2014–15, Statement 4, Australian Government,
Canberra, <http://www.budget.gov.au/2014-15/content/bp1/html/bp1_bst4-03.htm>; Australian Bureau of Statistics 2016, Australian
System of National Accounts, 2015–16, cat. no. 5204.0, ABS, Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/5204.0>.
a gap of 6 per cent projected by 2030 (Figure 4).18 How well we use digital technology will be
Although labour productivity will provide some critical. Digital technology increases the
continuing growth, at current rates it will not productivity of existing practices and creates
make up the shortfall in labour growth from new domestic and export markets and services
retirement. that expand growth. Greater adoption of digital
technology could increase Australia’s annual
Because improving employment growth and
GDP growth rate by 0.7–1.2 per cent.19 Rather
labour productivity alone will not be enough to
than fearing that digitalisation and automation
close the growth gap, Australia will also need to
will erode jobs or opportunity, we should
improve capital and multifactor productivity (a
recognise that these changes will be positive
change in output per unit of combined inputs;
for the economy, and are essential to fill the
for example, labour and capital). Multifactor
workforce gap left by demographic change, to lift
productivity reflects innovations that allow more
productivity and contribute to GDP growth.
efficient use of labour or capital, such as by
improved knowledge or management practices
or greater network or spillover effects.
18 McKinsey Global Institute analysis based on The Conference Board Total Economy database; International Labour Organization;
United Nations Population Division.
McKinsey&Company,

Figure 4 Gap between full-time equivalent (FTE) projections and number of FTEs to
maintain current gross domestic product per capita in 2030
FTE = full-time equivalent

Note: Gap indexed as percentage of number of FTEs in 2014.
Sources: The Conference Board Total Economy Database, Output, labor, and labor productivity, 1950–2017, <https://www.conference-
board.org/data/economydatabase/index.cfm?id=27762>; International Labour Organization, United Nations Population Division, Statista,
McKinsey Global Institute analysis.
Many jobs will get better, but we will and transaction jobs. Interaction jobs involve
need different skills to do them more complex human interactions and
judgements. They include roles such as sales
Over the past 70 years, the nature of work account managers, nurses, or construction
in Australia has transformed. The first major managers. Production jobs involve making
shift was a gradual transition in the industries and moving things – such as manufacturing
Australians worked in. Jobs in construction, production line workers or construction workers.
manufacturing, mining and agricultural Transaction jobs involve procedural, rules-based
decreased while service sector jobs increased tasks, such as bookkeepers or clerks. Interaction
and now employ 80 per cent of Australians.20 jobs now account for 50 per cent of jobs in
A second shift has been an increase in Australia, and will account for 60 per cent of the
interaction jobs and a decrease in production workforce by 2030.21
21 Jobs for NSW 2016, Jobs for the future: Adding 1 million rewarding jobs in NSW by 2036, Jobs for NSW, Sydney,
<https://www.jobsfornsw.com.au/__data/assets/pdf_file/0020/90740/Jobs-for-the-future-full-report-August-2016.pdf>, p. 25.

Figure 5 Change in time spent on different types of tasks performed by Australian
workers, 2000–30
Source: AlphaBeta 2017, The automation advantage, AlphaBeta, Sydney, <http://www.alphabeta.com/the-automation-advantage>.
The skills needed to perform jobs are also is also changing to require and favour a higher
changing. Digital and science, technology, quotient of STEM jobs and skills. Occupations
engineering and mathematics (STEM) skills are currently requiring STEM skills are outstripping
increasing in importance. Basic digital literacy overall employment growth.24
skills include the ability to use digital platforms
By 2030, jobs across the board will require
and programs to communicate, market, transact
employees to spend more time using 21st-
and find information. More advanced digital
century skills. These include interpersonal,
skills include the ability to design, build,
creative, problem-solving and entrepreneurial
configure and use digital platforms, programs
skills (Figure 5). Workers will spend less time
and systems and to develop software and
on predictable physical tasks, such as scanning
algorithms.22 Ninety-two per cent of future jobs
grocery items at a supermarket check-out, or
will require some form of digital skills,23 making
rote administrative tasks, such as processing
digital literacy an essential foundation workforce
expenses, because these functions can be
skill, in the same league as basic literacy and
automated. Although the workplaces of the
numeracy today. Australia’s employment mix
future will still require employees to work with
22 AlphaBeta 2017, The new work order: ensuring young Australian have skills and experience for the jobs of the future, not the past,
Foundation for Young Australians, Melbourne, <https://www.fya.org.au/report/new-work-order>.
23 Stanwick, J, Lu, T, Rittie, T & Circelli, M 2014, How young people are faring in the transition from school to work, Foundation for Young
Australians, Melbourne, <https://www.fya.org.au/report/how-young-people-are-faring-2014>, p. 30.
24 Australian Government Department of Employment 2017, Labour Market Information Portal: employment projections, Department of
Employment, Canberra, <http://lmip.gov.au/default.aspx?LMIP>. STEM occupations are defined as occupations where a majority of
people have a STEM qualification, based on: Australian Bureau of Statistics 2014, Perspectives on education and training: Australians
with qualifications in science, technology, engineering and mathematics (STEM), 2010–11, cat. no. 4250.0.55.005, ABS, Canberra,
<http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4250.0.55.005main+features62010%E2%80%9311>.

machines, the nature of the relationship with a dramatic increase in the number of finance
those machines will likely be very different. professionals – a job that requires more
Success will require workers to have the ability specialist advisory skills. These roles grew from
to communicate and empathise with other just over 30,000 people to around 90,000 people
workers and customers, as well as the skills in the same period.26
to use the advanced tools that technology will
Given the mix of future occupations is uncertain,
make available.
but the skills needed to perform them are clear,
These trends mean education needs to develop it is important that Australia’s education system
and support both STEM skills and humanities, provides the right foundation of skills to give
arts and social sciences (HASS) skills that every child the best chance in life, and provides
nurture interpersonal skills such as empathy the lifelong opportunity to retrain throughout
and creativity. their working life.
These skills are not just a future imperative
for workers. Between 2012 and 2015, digital Our companies face greater
skills were the fastest growing skill set sought
opportunities, but fiercer competition
by Australian employers in early-career
roles (growing at 212 per cent per year), Australian companies operate in a fundamentally
alongside critical thinking (158 per cent), different business environment to the one
creativity (65 per cent) and presentation skills they knew at the start of the century. They
(25 per cent). Early-career jobs requiring these have a greater ability to seize global market
skills pay around $8000 more per year.25 opportunities, enabled by digital technology and
Although there are exciting employment the rise of emerging country economies. They
opportunities ahead, they will vary by location also face stiffer competition.
and industry. Digital disruption and automation Two trends have reshaped global markets in
will continue to change the mix of industries the last decade: the rise of firms in emerging
and jobs in Australia. The non-linear nature of markets, such as China, and the shift to
disruptive technological change will make it technology-driven businesses. Emerging-market
challenging to predict the new jobs that will firms have grown rapidly and became fierce
be created, the jobs that will be lost, and the competitors in markets previously dominated
timing of such changes. This uncertainty can by mega companies in developed economies.
be disconcerting, but it does not mean that Since 2000, these new companies have grown
the net result will be negative for jobs. In the from less than 5 per cent of the Global 500
early 1990s, just over 90,000 Australians were to more than 25 per cent.27 This shift is being
employed as bank tellers. By 2014, this figure accompanied by a broader rebalancing of
had almost halved to around 50,000 people economic power to Asian emerging markets.
as roles were replaced through self-service China is expected to have a nominal GDP
technologies, such as internet banking 50 per cent greater than the United States in
and automatic teller machines. However, 2050 and India is expected to climb from 9th in
counterbalancing this decline in tellers was GDP size in 2014 to 3rd in 2050.28 The fact that
25 AlphaBeta 2017, The new basics: big data reveals the skills young people need for the new work order, Foundation for Young
Australians, Melbourne, <https://www.fya.org.au/report/the-new-basics>.
26 Hajkowicz, SA, Reeson, A, Rudd, L, Bratanova, A, Hodgers, L, Mason, C & Boughen, N 2016, Tomorrow’s digitally enabled workforce:
megatrends and scenarios for jobs and employment in Australia over the coming twenty years, CSIRO, Brisbane,
<https://research.csiro.au/lifelong/tomorrows-digitally-enabled-workforce>.
27 Fortune 2017, Global 500, <http://fortune.com/global500/list>; World Economic Forum 2016, The new Fortune Global 500 is out. It
shows a shift in the world’s business landscape, WEF, Geneva,
<https://www.weforum.org/agenda/2016/07/new-fortune-global-500-shift-business-landscape>.
28 The Economist Intelligence Unit 2015, Long-term macroeconomic forecasts: key trends to 2050, The Economist, London,
<https://www.eiu.com/public/topical_report.aspx?campaignid=ForecastingTo2050>, p. 3.

case study 1 Transforming opportunity in Geelong
Geelong is a city in transition. The city was in advanced manufacturing in globally
hit hard by the decline in manufacturing competitive companies, such as Carbon
and closure of iconic factories and large Nexus, LeMond Composites and Carbon
employers, such as the Ford Australia Revolution, which have eased the impact
manufacturing plant and Alcoa’s Point of Geelong’s manufacturing transition. To
Henry smelter. While change has been ensure local workers have the right skills
painful, Geelong is steadily carving out for these new jobs, the precinct works
a brighter future, creating new jobs and with the close-knit education providers in
growth in areas of existing strengths such as the Geelong region to provide retraining
engineering, design and materials science, opportunities for people disrupted by
a legacy of its manufacturing base, and in Geelong’s changing industrial landscape.
emerging strengths such as information and
When Evan Llewellyn’s job at Alcoa ended
communications technology and health care.
after 16 years, he moved to Carbon Nexus as
A central plank in this rebuild strategy was a technical operator. For Evan, the change
the creation of the Geelong Future Economy resulted in a better job with more variety and
Precinct at Deakin University, which aims problem-solving challenges.
to better connect education and research
These initiatives are already making a
with industry, and ensure students have
difference to Geelong. By December 2016,
job-ready skills, whether they are setting out
the city’s unemployment rate was down to
on their first career or undertaking a career
5.9 per cent – close to the national average,
change.
and 21,500 jobs had been created in
In five years, the precinct has created over two years.
1000 jobs, which include skilled roles

Figure 6 Global research and development expenditures and global gross domestic
product growth, 2005–14
GERD = gross expenditure on research and development; BERD = business expenditure on research and development;
GDP = gross domestic product
Source: Global Innovation Index 2016; author’s estimate based on the UNESCO Institute for Statistics database and the International
Monetary Fund World Economic Outlook database, 2016.
this level of growth is occurring in markets that These trends mean the nature and speed of
are largely within Australia’s geographic region competition has changed. Australian firms are
makes it a particularly important and novel operating in an environment where companies
trend, with significant and positive implications that can solve a global need using technology
for our economy. can scale fast and generate significant financial
value. The countries that generate globally
At the same time, technology and tech-enabled
successful firms benefit disproportionately in
firms have gained global scale, changing
the global economy because the firms create
business models and disrupting traditional
most jobs in their local market. Facebook,
markets and profits. This has redefined the
for example, launched in 2004, reached
global share of profits, shifting them in favour
50 million users in one year, and has a market
of companies that are ideas-based and can
capitalisation today of over US$500 billion. It
start and scale quickly across multiple markets.
employs more than 20,000 workers worldwide,30
Asset-light, idea-intensive sectors in developed
with over a quarter based in Menlo Park,
economies – for example internet, finance and
California, where Facebook is headquartered.
pharmaceutical companies – have doubled their
Facebook estimates it will increase the number
share of developed-economy company profits
of workers at the Menlo Park site to 17,000 by
from 17 per cent in 1999 to 31 per cent today.29
29 McKinsey&Company 2015, Playing to win: the new global competition for corporate profits, McKinsey&Company,
<https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-new-global-competition-for-
corporate-profits>, p. 6.
30 Facebook 2017, Company info, Facebook, <https://newsroom.fb.com/company-info>.

2018.31 When Australian companies achieve However, opportunities in the next decade will
global scale, they trigger a similar local jobs be amplified by the sheer ubiquity of technology
boom. Software company Atlassian, for example, in our lives, the pace of innovation, and the
employs over 2200 people globally and 1000 are scale of adoption. Global opportunities will also
based in Australia. accelerate as digital technologies combine with
asset-intensive domains like healthcare and
The shift of profits to IP-intensive companies has
agriculture to create more value for consumers,
also ignited a global innovation race. Countries
and new methods for competing.
and companies are accelerating their investment
in innovation faster than their GDP growth to win Over the past decade, we have experienced a
a bigger share of the economic prize (Figure 6). digital communications revolution. The speed
of the change is unprecedented: it took radio
Australia lags behind our global peers in gross
38 years to attract an audience of 50 million
expenditure on research and development
people; television took 13 years, while the
(GERD) as a percentage of GDP. We rank 20th
internet took three years.34
in the OECD, primarily because business R&D
investment is lower relative to other countries A suite of new digital technologies, such as
(Figure 7).32 machine learning, optimisation, artificial
intelligence, sensing, robotics, visualisation
Competition is a risk and opportunity for
and distributed ledgers, are opening new
Australian businesses. Australian companies
opportunities for innovation.
that can solve global problems with new
technology and enter confidently into multiple Exponential increases in computer power,
new export markets can grow larger quickly. data, algorithm performance and funding are
However, the same forces powering this growth fuelling rapid advances in artificial intelligence
mean more companies can enter and disrupt (AI) and robotics. Australia punches above
Australian markets. This dichotomy means its weight in AI research and hosts several
that Australian companies will need to scale, industrial labs with solid track records of
innovate and become more productive to thrive. transitioning AI technologies into practice.35
Yet at the same time that domestic industries are The rapidly expanding field of AI is being
exposed to new entrants and global competition, driven by significant investments which are
there is emerging evidence that, in some non- highly concentrated geographically, focused on
tradeable sectors, the Australian economy is established hubs centred around AI research and
experiencing declining competitiveness.33 development work by tech giants, particularly
in China and the United States (Figure 8).
AI‑related patent activity between the big
Technology will continue to transform Silicon Valley technology companies indicates
our world that competition is fierce. These developments
are opening up new markets for robotics and
Technology has always changed the way we
enabling vast amounts of information in different
do things and created new economic value.
31 Kelly, K 2017, ‘Facebook leasing more space in Menlo Park for even more employees’, The Mercury News, 18 May,
<http://www.mercurynews.com/2017/05/18/facebook-leasing-more-space-in-menlo-park-for-even-more-employees>.
32 Organisation for Economic Co-operation and Development 2017, Main science and technology indicators, OECD, Paris,
<http://www.oecd.org/sti/msti.htm>; Australian Bureau of Statistics 2017, Research and experimental development, businesses,
Australia, 2015–16, cat. no. 8104, ABS, Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/8104.0>.
33 Leigh, A & Triggs, A 2016, ‘Markets, monopolies and moguls: the relationship between inequality and competition’, Australian
Economic Review, vol. 49, no. 4, pp. 389–412.
34 Dobbs, R, Manyika, J & Woetzel, J (2015). No ordinary disruption: the four global forces breaking all the trends, McKinsey Global
Institute, <https://www.mckinsey.com/mgi/no-ordinary-disruption>.
35 Walsh, T 2017, The AI revolution, Education: Future Frontiers occasional paper series, NSW Department of Education, Sydney.

Figure 7 Australia’s expenditure on research and development compared with peers, 2015
GDP = gross domestic product; R&D = research and development

a Includes higher education expenditure on research and development and government expenditure on research and development.
Source: Organisation for Economic Co-operation and Development 2017, Main science and technology indicators, OECD, Paris,
<http://www.oecd.org/sti/msti.htm>.
Figure 8 Global investments in artificial intelligence, 2016
Note: ’External’ and ‘internal’ investments are estimates of annual venture capital and private equity investment by companies in AI and
refer to whether the investment originates from within or outside of the region.
Source: Manyika, J 2017, 10 Imperatives for Europe in the age of AI and automation, McKinsey&Company, <https://www.mckinsey.com/
global-themes/europe/ten-imperatives-for-europe-in-the-age-of-ai-and-automation>; Bughin, J, Hazan, E, Ramaswamy, S, Chui, M, Allas, T,
Dahlström, P, Henke, N & Trench, M 2017, Artificial intelligence: the next digital frontier?, McKinsey&Company.

forms to be rapidly processed and utilised.36 The Australian Securities Exchange leads the
Computers can now outperform humans at air-to- world in the exploitation of new technologies
air combat, diagnosing pulmonary disease and like blockchain, and Australian researchers are
transcribing spoken languages.37 The upshot is working on the next disruption to asset trading
that a new generation of technology is emerging systems.40
that will have far-reaching impact.
Digital technologies are also reshaping markets
McKinsey and Company have calculated in Australia. Digital is increasing cross-sector
that digitalisation could contribute ‘between competition, enabling larger technology players
AU $140 billion and AU$250 billion to Australia’s with low-cost ways of storing, transporting and
GDP by 2025, based on currently available replicating data to scale quickly into adjacent
technology alone’. 38 Across all sectors, businesses and sectors. Apple is becoming a
Australian companies’ adoption of digital healthcare company and Tesla an energy company.
technologies is important for the productivity Companies that can achieve scale first typically
benefits these technologies generate. capture the biggest share of the market value and
sector growth – such as Facebook and Twitter in
Although Australian companies have generally
social networking – through effective use of their
been ready adopters of digital technology, there
data assets and through the premium of the
is still room for growth. The mining industry is
network effect, where a product with more users
ideally positioned to realise the financial and
has more value. This means moving quickly, with
safety benefits of robotics and automation.
global ambition, has never been more important
Australia’s mining sector led the world in the
for Australian companies.
application of automation to remote sites. Rio
Tinto’s Mine of the Future in Western Australia’s Around 15 per cent of global goods and services
Pilbara includes the world’s longest private are now traded on e-commerce platforms, such as
railroad, much of it automated, and the world’s Alibaba and Amazon.41 These platforms are also
largest fleet of autonomous trucks. The Perth serving as the launch pads for thousands of small-
control room for the mine – 1500 kilometres sized and medium-sized enterprises, giving them
south of the site – has more than 400 operators the reach to challenge larger companies. Although
tracking 3D visualisations of every piece of there are significant benefits for businesses who
capital equipment covering 15 mines, 31 pits can scale and adapt quickly, there are also risks
and 4 ports.39 These investments in automation for incumbents as new business models disrupt
mean that, globally, Australia’s mining industry traditional markets and services.
rates highly for labour digitalisation. However,
The key for Australia to capitalise on these
there is room to improve in the digitalisation of
opportunities is to combine our core strengths in
supply chain management and customer service.
asset-intensive physical domains with emerging
Our finance sector is also well placed to take
digital technologies and economic structures.
advantage of AI developments and Australia has
a rich history of market infrastructure innovation.
36 Manyika, J 2017, 10 Imperatives for Europe in the age of AI and automation, McKinsey&Company,
<https://www.mckinsey.com/global-themes/europe/ten-imperatives-for-europe-in-the-age-of-ai-and-automation>.
37 Walsh, T 2017, The AI revolution, Education: Future Frontiers occasional paper series, NSW Department of Education, Sydney,
<https://education.nsw.gov.au/media/exar/The_AI_Revolution_TobyWalsh.pdf>.
McKinsey&Company,
39 Rio Tinto 2017, Rio Tinto Operations Centre, Rio Tinto, Perth, <https://riotintogroundbreakers.com/50-operations-centre>.
40 Eyers, J 2017, “Better than blockchain” new asset trading system unveiled’, Australian Financial Review, 19 September,
<http://www.afr.com/technology/better-than-blockchain-new-asset-trading-system-unveiled-20170919-gyk7mb#ixzz4vdz42OSg>.
41 Manyika, J 2017, 10 Imperatives for Europe in the age of AI and automation, McKinsey&Company,
<https://www.mckinsey.com/global-themes/europe/ten-imperatives-for-europe-in-the-age-of-ai-and-automation>.

We need to use a new toolkit to solve CSIRO’s Data61, Australia’s national information
our biggest societal challenges and communication technology (ICT) research
institute, is also helping to make Australia
Science, technology and innovation are a safer place to live. They are trialling new
instrumental in meeting Australia’s rising demand optimisation modelling tools with firefighters
for public services, and tackling Australia’s in Victoria’s Otway region to support real-time
biggest societal and environmental challenges, evacuation planning along the Great Ocean Road
including improving health outcomes, increasing in the event of a bushfire.
public safety, and decarbonising the economy.
The strength of Australia’s local talent – and
Demand for critical public services is growing at advances in technology and science – mean
a faster rate than governments can fund them. we need to raise our aspirations as a nation
Australia’s ageing population is increasing about what we can achieve. One example is
demand for health services, which will result the opportunity to integrate genomics and
in Australian Government health spending precision medicine into our healthcare system
per capita approximately doubling by 2054– to ensure that Australia continues to be one of
55.42 Australian capital cities will be home to the healthiest countries on Earth. Genomics
6.4 million additional people by 2031,43 putting is the study of genomes, our complete DNA,
major pressure on transport and infrastructure. and it will play an important role in improving
Tackling our national challenges is not the job of health outcomes through early diagnosis,
governments alone. Australia has a world-class preventative health, and safer and more
pool of researchers, and an increasingly powerful personalised treatments. Australian researchers
technological toolkit, created by concurrent can use genomics to build on advances in
improvements in the performance and cost of precision medicine to tackle key causes of
complementary technologies such as genome death and disability, and to accelerate access to
sequencing, low-carbon energy, machine breakthrough treatments to deliver better and
learning, AI, optimisation, visualisation, sensors more affordable health outcomes.
and robotics.
These advances are already changing Australian Context for the 2030 Plan
lives for the better. The Walter and Eliza
Hall Institute in Melbourne has developed a Successive governments have demonstrated a
pioneering drug, Venetoclax, to treat leukaemia, long-term commitment to promoting innovation
which has just been approved for use in Australia, and science in Australia. This commitment has
the European Union and the United States. been informed by a series of strategic reviews
Venetoclax builds on decades of research by the including The Chance to Change (2000),45 which
institute. Venetoclax has demonstrated promising led to the Backing Australia’s ability46 set of
results in Australian trials: 20 per cent of patients policy initiatives, and Venturous Australia
treated achieved complete clearance of cancer, (2008),47 which led to the Powering ideas48 set of
and 54 per cent showed partial clearance.44 policy initiatives.
42 Australian Treasury 2015, 2015 intergenerational report: Australia in 2055, Australian Treasury, Canberra,
<https://static.treasury.gov.au/uploads/sites/1/2017/06/2015_IGR.pdf >, p. 62.
43 Infrastructure Australia 2015, Population estimates and projections: Australian Infrastructure Audit background paper April 2015,
Infrastructure Australia, Sydney, <http://infrastructureaustralia.gov.au/policy-publications/publications/files/Background-paper-on-
demographic-projections.pdf>, p. 27.
44 Walter and Eliza Hall Institute of Medical Research 2013, Trial results bring high hopes for advanced leukaemia, WEHI, Melbourne,
<https://discovery.wehi.edu.au/timeline/leukaemia-trial>.
45 <http://trove.nla.gov.au/work/33066753?q&sort=holdings+desc&_=1508803244125&versionId=180146693>
46 <https://industry.gov.au/innovation/reportsandstudies/Documents/InnovationReport2002-03.pdf>
47 <https://www.industry.nsw.gov.au/__data/assets/pdf_file/0006/55383/NIS_review_Web3.pdf>
48 <https://www.industry.gov.au/innovation/InnovationPolicy/Pages/PoweringIdeas.aspx>

The Australian Government renewed its In addition, a number of key issues were raised
commitment to innovation and science in around enabling infrastructure, including the
Australia by releasing the National Innovation criticality of affordable, high-speed and reliable
and Science Agenda (NISA) in December 2015. internet access; availability of affordable and
NISA provided an immediate boost to Australia’s reliable energy; and sufficient rail and road
innovation capability through a $1.1 billion transport (particularly from the urban periphery
investment. It also set up a long-term, strategic into the major cities). Notably, the required
approach to support innovation in Australia performance levels of such infrastructure
by establishing Innovation and Science (whether in terms of baseline broadband access
Australia (ISA). speeds or urban transit times) are only expected
to become more demanding over time, so it
ISA’s Board was tasked with undertaking a
is important to plan with the future in mind.
performance review of Australia’s innovation,
Although infrastructure issues such as these are
science and research system, and producing
beyond the scope of this plan, the 2030 Plan
a strategic plan to accelerate innovation in
does address many of the industry needs that
Australia by 2030. The 2030 Plan’s objective is
depend on these infrastructure capabilities.
to make long-term recommendations for policy
makers to optimise the Australian Government’s
$10 billion annual investment in innovation,
science and research. This investment includes Australia’s innovation
direct funding for research institutions and imperatives
research activity, and indirect support through
the tax system. Innovation is critical to Australia’s future
opportunity; Australia is part of a global
Australia 2030: prosperity through innovation innovation race, and we need to step up our pace
will help policy makers at all levels of to avoid being left behind by other countries.
government to act on the challenges identified
in the performance review. It will also help ISA’s performance review of the Australian
participants in the innovation, science and innovation, science and research system,
research system by presenting an integrated published in February 2017, confirmed that
perspective on how governments can support Australia had important strengths to build on
their innovation efforts. The 2030 Plan’s in each part of our innovation system, such as
development has benefited from extensive world-class researchers and a diverse industrial
input from people and organisations across the base. It also found uneven performance across
country through consultation forums, written the system.49 It identified critical gaps, such as
submissions, surveys and expert consultation Australia’s lagging performance relative to its
(Figure 9). It also builds on additional analysis of peers in commercialising and exporting ideas,
the strengths and weaknesses of the Australian and a tendency towards incremental rather than
system as identified in the performance review. new-to-world innovation in business. ISA’s review
process also identified significant challenges in
ISA has heard the many passionate and reasoned measuring performance due to limited impact and
voices addressing the nation’s roadblocks outcome data for Australian innovation activities.
and enablers to achieving our full innovation
potential in the consultations and submissions. In considering how to frame its strategy for the
These voices provided many great, practical future, ISA has recognised that innovation is the
ideas to improve the innovation, science and product of a collaborative ecosystem and culture.
research system, which have informed the 2030 Being a top-tier nation for innovation and science
Plan’s development in several places. means cultivating a world-class innovation
ecosystem in Australia. The innovation ecosystem
49 Innovation and Science Australia 2016, Performance review of the Australian innovation, science and research system, ISA, Canberra,
<https://industry.gov.au/Innovation-and-Science-Australia/Pages/default.aspx>.

Figure 9 Innovation and Science Australia’s stakeholder engagement

is complex and dynamic, and hence a degree of Bay hinterland. Large Australian cities attract
simplification is helpful to aid analysis. To frame greater R&D activity and related investment.50
its planning, ISA has identified five overlapping Some Australians will work directly in knowledge
components that would constitute a thriving or innovation-intensive jobs, while others will
innovation and science system in Australia. primarily benefit from an education that equips
The five components are: them to find good jobs in their chosen field. The
goal of the 2030 Plan is not to pursue a one-
1 Education – the foundation stone of an
size-fits-all approach to innovation, but rather to
innovation system because the capability of
enable innovation and science to flourish across
systems is determined by the ability of the
the system, and throughout the country, for the
people in them
benefit of all Australians.
2 Industry – the primary source of innovation
investment, implementation, and scale-up, and
generator of jobs and growth
3 Government – as the largest firm in the
economy, and the architect of laws and
markets, governments facilitate and
exemplify innovation
4 Research and development (R&D) – as
the engine of new ideas generation and
exploitation, R&D fuels innovation in the
wider economy
5 Culture and ambition – as innovation is
a quintessentially human activity, our
aspirations and inspiration are shaped by the
cultural context in which it occurs.
The 2030 Plan defines five imperatives for
action, aligned with the components above,
that collectively create a long-term roadmap for
increasing innovation performance in Australia. For
each imperative, the 2030 Plan highlights strategic
opportunities and actionable recommendations
for governments to accelerate impact across
the innovation system by 2030 (Table 1). It also
suggests key metrics to measure success in
delivering the ideas in each imperative, and a
roadmap to implement them.
Critically, the 2030 Plan recognises that
innovation in Australia takes different forms.
Regional communities undertake diverse forms of
innovation, ranging from businesses and scientific
and technical professionals working in competitive
tradeable sectors such as agriculture and mining,
to entrepreneurs attracted by the lifestyle to
working in regional communities such as the Byron
50 Regional Australia Institute 2017, [In]Sight – Innovation in regional Australia: spreading the ideas boom, Regional Australia Institute,
Canberra, <http://www.regionalaustralia.org.au/home/innovation-insight-update>.

Table 1 How Australia 2030: prosperity through innovation will improve the
innovation system
Innovation system
imperative Key findings from the 2016 performance review What the 2030 Plan seeks to achieve
Australia has good higher education and school Australia’s school, vocational and tertiary
systems based on world rankings, but domestic education systems are world class and
school student performance is going backwards in equip all Australians with the skills
1. Education the critical disciplines of mathematics and science relevant to 2030
and vocational education is slipping
Australian businesses are applying innovation Australian jobs and prosperity grow as a
within their business, but lag counterparts in other result of new industry R&D investment,
countries in introducing new-to-world innovations new-to-world innovation, a stronger base
2. Industry of high-growth firms and exports, and
greater competition and productivity
Australian governments are keeping pace with other Australian governments catalyse
countries in opening up data and supporting digital innovation by designing responsive and
government, but could increase their use of other flexible regulatory frameworks, increase
levers, such as procurement expenditure their strategic use of procurement and
3. Government
achieve world-leading service delivery
standards
Australia is above average globally at knowledge R&D has increased impact in Australia
creation, with world-class researchers and as a result of increased translation and
research infrastructure, but can improve in the commercialisation of research, investment
commercialisation of research ideas, and the in national research infrastructure, and
4. Research & amount invested in research and development; research collaboration across sectors,
development in particular, Australia lags its global peers in its making Australia a top destination for
overall expenditure, and rate of growth in spending, leading researchers, investors and
on R&D entrepreneurs
Australia benefits from being a diverse, multicultural Our most talented kids are inspired to be
country, but innovation culture too often focuses innovators and entrepreneurs and to tackle
on short-term objectives rather than longer-term, global challenges, spurred on by National
aspirational goals Missions that entrench a strong national
culture of ambition and innovation
5. Culture & ambition
R&D = research and development

24
Section B:
Five
imperatives
for action
IMPERATIVE 1
Education: Respond to the changing nature
of work by equipping all Australians with skills
relevant to 2030
ISA’s vision is that Australia has • Strategic opportunity 1.2: Australia’s

vocational education and training system
a world-leading education system
can be made responsive to the new priorities
that equips all Australians with the presented by innovation.
skills and knowledge relevant to
The 2030 Plan focuses on the school and
2030. Realising this vision is the vocational education and training (VET) system.
first imperative of this plan because The quality of the school system determines
providing a world-class education is whether young people receive the relevant
fundamental to Australia being an foundation of knowledge and skills for future
jobs or the option to undertake advanced
innovative and fair country by 2030. qualifications.
Education determines the capability
Vocational education provides initial skilling and
of workers and entrepreneurs, and helps workers to retrain as jobs and industries
therefore the economy’s productivity evolve, including in response to economic and
and innovation capacity. Education technological change.
also shapes Australians’ life Australia’s university sector is also critical to
opportunities. meeting Australia’s future workforce needs. ISA’s
performance review found the university system
Governments have a key role to play in is already performing well in the education
realising this vision because they design, fund outcomes it is delivering, and the biggest
and regulate many aspects of the Australian improvement opportunity relates to the sector’s
education system. industry linkages and commercialisation activity,
which are addressed in Imperative 4.
Strategic opportunities for

government Strategic opportunity 1.1:
There are two strategic opportunities for
governments to strengthen Australia’s education Teaching of science, technology,
system by 2030: engineering and mathematics and 21st-
century skills can be improved through
• Strategic opportunity 1.1: Teaching of science,
development for teachers and school
technology, engineering and mathematics and
21st-century skills can be improved through leaders, and education inequality can be
development for teachers and school leaders, reduced through targeted interventions
and education inequality can be reduced
through targeted interventions
26 Section B: Five imperatives for action

Rationale most effective at driving significant school
system improvement based on a system’s
To give every Australian child the best chance starting point. Based on the Australian system’s
in life, Australia’s school system must ensure current performance and its aspirations for
that young people leave school with the skills improvement, this research suggests there are
and knowledge they need to thrive in the 2030 four interventions that would lift Australian
workforce. school system performance:
This starts with ensuring that Australian student • investing in professional development and
outcomes in core disciplines are on par with support for teachers and school leaders,
leading countries. It also means equipping including through keeping the curriculum
students with the skills and knowledge crucial to current
future jobs, such as STEM skills and 21st-century • ensuring students are motivated to pursue
skills, which include hypothesis-driven problem the skills they need to succeed in the future
solving, digital skills, entrepreneurialism, workforce
creative thinking and interpersonal skills.
• investing in targeted interventions for schools
The challenge for this vision is that Australian or school systems where student learning
school system performance has declined in the levels are significantly below the national
last decade, both relative to other countries average
and in real terms (Figure 10). The decline is • further improving transparency and
particularly acute in core STEM subjects, such as accountability across school systems.
science and mathematics.51
Not shown in Figure 10 is that Australia has Investing in professional development and
fewer higher achievers and greater numbers support for teachers
of low-achieving students than comparable
systems.52 We significantly lag behind the best The quality of teachers is the single biggest
education systems in the world, with the average in-school influence on a student’s educational
15-year-old Australian roughly one to two years performance.54 Research shows differences in
behind the average 15-year-old in Shanghai, the level of achievement of two students can
Hong Kong and Singapore in mathematics, and diverge by more than 50 percentile points over
6–12 months behind in science and reading.53 three years, depending on the teacher they are
For some student cohorts, such as Indigenous assigned.
Australians, student outcomes are significantly Australian governments have recently
worse than even the average for OECD countries. undertaken substantial work to improve the
Australia’s declining performance has occurred quality of initial teacher education through the
despite significant increases in school funding, Action now: classroom ready teachers strategy.
suggesting improvements will come from Measures implemented through the strategy
more effective interventions, not more money. include stronger quality assurance of teacher
International research by McKinsey & Company education courses, more demanding selection
has examined which interventions have been requirements for entry to teacher education, and
51 Productivity Commission 2016, Report on government services 2016, PC, Canberra,

<https://www.pc.gov.au/research/ongoing/report-on-government-services/2016>.
52 Goss, P, Sonnemann, J, Chisholm, C & Nelson, L 2016, Widening gaps: what NAPLAN tells us about student progress, Grattan Institute,
Melbourne, <http://grattan.edu.au/wp-content/uploads/2016/03/937-Widening-gaps.pdf>, Figure 1.
53 Jensen, B, Hunter, A, Sonnemann, J & Burns, T 2012, Catching up: learning from the best schools in East Asia, Grattan Institute,
Melbourne, <http://grattan.edu.au/wp-content/uploads/2014/04/130_report_learning_from_the_best_detail.pdf>, Figure 2.
54 Sanders, WL & Rivers, JC 1996, Cumulative and residual effects of teachers on future student academic achievement, University of
Tennessee, Knoxville, <http://www.cgp.upenn.edu/pdf/Sanders_Rivers-TVASS_teacher%20effects.pdf>.

Figure 10 School education funding and outcomes, 2004–05 to 2015–16
PISA = Programme for International Student Assessment

Note: The left-hand axis refers to total public funding per student, which in constant dollars has increased by 15% over the period. The right-
hand axis refers to average PISA scores, which from 2006–07 to 2015–16 have declined by 3% in scientific literacy; and from 2004–05 to
2015–16 have declined by 5% in mathematical literacy and 3.5% in reading.
Source: OECD Programme for International Student Assessments 2015, Results by country, <http://www.oecd.org/pisa/>; Productivity
Commission 2017, Report on government services, Chapter 4 School education attachment tables, <http://www.pc.gov.au/research/
ongoing/report-on-government-services/2017/child-care-education-and-training/school-education>.
improved and structured practical experience for In addition to these measures, the quality
initial teacher education students.55 of initial teacher training could be further
strengthened by a focus on discipline-specific
There are indications of a significant decline
knowledge, particularly in secondary education.
in the entry criteria (such as the Australian
Countries with leading education systems,
Tertiary Admission Rank) of teacher education
such as Finland, Singapore and China, require
courses following the expansion in enrolments
secondary teachers (in STEM subjects) to be fully
in pre-service courses over the last 10 years. The
qualified in their discipline and to teach in that
Action now: classroom ready teachers report
field and no others.57
noted that ‘high-performing education systems
screen initial teacher education students against Furthermore, professional development
criteria they believe will make the best teachers, opportunities for working Australian teachers
including academic capability, literacy and could also be improved. Australian teachers
numeracy skills and personal characteristics.’56 spend less time on professional development
It will be important to monitor the effect of activities compared with their international
the strategy on the standard of teacher entry counterparts, with an average of three days
requirements. a year in training compared with seven days
55 Teacher Education Ministerial Advisory Group 2014, Action now: classroom ready teachers, Australian Government Department of
Education, Canberra, <https://docs.education.gov.au/system/files/doc/other/action_now_classroom_ready_teachers_accessible.pdf>.
56 Teacher Education Ministerial Advisory Group 2014, Action now: classroom ready teachers, Australian Government Department of
Education, Canberra, <https://docs.education.gov.au/system/files/doc/other/action_now_classroom_ready_teachers_accessible.pdf>.
57 Marginson, S, Tytler, R, Freeman, B & Roberts, K 2013. STEM: Country comparisons – report for the Australian Council of Learned
Academies, <http://acola.org.au/wp/project-2>.

internationally.58 The quality of these programs are teaching within their field of training) and
is also inconsistent. Only half of Australian out-of-field (where teachers are teaching outside
teachers attending professional development their field of training). The Council of Australian
programs report a moderate or large change Governments (COAG) Education Council’s
in their day-to-day teaching as a result of National STEM School Education Strategy noted
the programs.59 five areas in which Australia could increase
student STEM ability, engagement, participation
Primary content gaps in professional
and completion of higher-level STEM courses in
development include 21st-century skills and
high school by improving the quality of STEM
pedagogical methods. Only 1 in 10 teachers
teaching. This included improving the pathway
has recently participated in professional
for STEM graduates into teaching to increase the
development to help students to develop
pool of in-field teachers, and supporting schools
generic, transferable skills for future work.60
to access specialist teachers in mathematics,
Teachers also need more support to use mixed
science and technology.
pedagogies.61 The OECD recommends a mix of
teacher-directed instruction and inquiry-based Out-of-field teachers also require support.
learning to deliver 21st-century skills62 and The Australian Council for Educational
improve STEM skills.63 However, use of inquiry- Research estimates that around 38 per cent of
based learning must be carefully selected and mathematics teachers are teaching out-of-field.67
appropriate to the subject content, or it can have This level of out-of-field teaching cannot be
a negative impact on student scores.64 Although wholly replaced by specialist teachers, which
inquiry-based learning approaches have been means support for out-of-field teachers is also
used for many years in Australia,65 teachers critical to lifting student outcomes. Teacher
report that they have insufficient instruction in professional associations could play a key role in
how to apply them in the classroom.66 professional development and support for out-
of-field teaching and non-teaching staff, such as
Discipline-specific professional development is
laboratory technicians.
critical for teaching both in-field (where teachers
58 Organisation for Economic Co-operation and Development 2013, Results from TALIS 2013: Australia, OECD, Paris,
<https://www.oecd.org/australia/TALIS-2013-country-note-Australia.pdf>, p. 3.
<https://www.oecd.org/australia/TALIS-2013-country-note-Australia.pdf>, p. 1.
60 Freeman, C, O’Malley, K & Eveleigh, F (Australian Council for Educational Research) 2014, Australian teachers and the learning
environment: an analysis of teacher response to TALIS 2013, Australian Government Department of Education, Canberra,
<http://research.acer.edu.au/cgi/viewcontent.cgi?article=1001&context=talis>. Teachers were asked whether they have
participated in professional development content in the 12 months before the survey that supported ‘approaches to developing
cross-occupational competencies for future work or future studies’ and ‘teaching cross-curricular skills (e.g. problem solving,
learning-to-learn)’. Responses to both questions were 10–11% positive.
61 Mourshed, M, Krawitz, M & Dorn, E 2017, How to improve student educational outcomes: new insights from data analytics,
McKinsey&Company, <https://www.mckinsey.com/industries/social-sector/our-insights/how-to-improve-student-educational-
outcomes-new-insights-from-data-analytics>.
62 Dumont, H, Istance, D & Benavides, F 2012, The nature of learning: using research to inspire practice, OECD, Paris,
<http://www.oecd.org/edu/ceri/thenatureoflearningusingresearchtoinspirepractice.htm>.
63 Jobs for NSW 2016, Jobs for the future: Adding 1 million rewarding jobs in NSW by 2036, Jobs for NSW, Sydney,
<https://www.jobsfornsw.com.au/__data/assets/pdf_file/0020/90740/Jobs-for-the-future-full-report-August-2016.pdf>, p. 55.
64 Mourshed, M, Krawitz, M & Dorn, E 2017, How to improve student educational outcomes: new insights from data analytics,
McKinsey&Company, <https://www.mckinsey.com/industries/social-sector/our-insights/how-to-improve-student-educational-
outcomes-new-insights-from-data-analytics>.
65 See, for example, the STELR program, an inquiry-based curriculum module now used in more than 600 schools: STELR 2016, About
STELR, STELR, Melbourne, <http://www.stelr.org.au/aboutstelr>.
Australians, Melbourne, <https://www.fya.org.au/report/new-work-order>.
67 Weldon, P 2016, Out-of-field teaching in Australian secondary schools, Policy Insights, Australian Council for Educational Research,
Melbourne, <http://research.acer.edu.au/policyinsights/6/>.

Teacher development could also be supported to be supported to teach effectively by ensuring
through improved performance feedback.68 that the curriculum reflects future skill needs.
Thoughtful and timely feedback improves
As Section A outlined, the mix of jobs in
employee performance in any occupation.
Australia, and the skills required to perform
However, Australian teachers generally perceive
them, will change by 2030. The Australian
feedback and appraisal as an administrative
Curriculum will need to help students to
exercise, rather than a way to identify their
gain a deep understanding of core subjects,
strengths and weaknesses and improve
including STEM and HASS, while simultaneously
performance. In an OECD survey, only 45 per cent
developing cross-cutting skills, such as digital,
of teachers reported that feedback led to positive
problem-solving and interpersonal skills, to
change in their teaching practices; this was
thrive in further education, training or work.
generally because feedback was not actionable
or did not motivate them to make the necessary The Australian Curriculum already includes 21st-
improvements.69 century skills or ‘general capabilities’ that can
be taught across core subject areas. The general
capabilities include critical and creative thinking,
Investing in professional development and
ICT capability and ethical and intercultural
support for school leaders understanding.71 However, a 2014 review of the
Principals, lead teachers and mentors play an Australian Curriculum found that the general
important role in setting direction and priorities capabilities were not effectively integrated into
for their schools and positively influencing the curriculum, particularly for primary schools,
culture and teaching practice. Top-performing because of the breadth of content that teachers
school systems overseas put mechanisms are already required to absorb and teach across
in place for the most capable teachers to the curriculum.72 The Foundation for Young
become ‘instructional leaders’. Instructional Australians has found that Australia can improve
leaders develop and motivate other teachers,70 student performance in 21st-century skills by
including by leading and supporting educational updating curricula as well as pedagogy.73
activity and professional development within The next review of the Australian Curriculum will
their school. be conducted in 2020; it should have a remit for
bold changes based on a review of the lessons
Keeping the Australian Curriculum current from other jurisdictions that have engaged
in major curriculum reform to equip students
The content taught in the Australian school
with the capabilities they need to thrive in the
system is based on the Australian Curriculum.
21st century. It will also be an opportunity to
Teachers and leaders in the school system need
68 Organisation for Economic Co-operation and Development 2009, ‘School evaluation, teacher appraisal and feedback and the
impact on schools and teachers’, In Creating effective teaching and learning environments: first results from TALIS, OECD, Paris.
<http://dx.doi.org/10.1787/9789264068780-7-en>.
69 Organisation for Economic Co-operation and Development 2013, TALIS 2013 Australia country note, OECD, Paris,
<https://www.oecd.org/australia/TALIS-2013-country-note-Australia.pdf> p.3; Organisation for Economic Co-operation and
Development 2013, Results from TALIS 2013, OECD, Paris, <http://www.oecd.org/edu/school/talis-2013-results.htm>.
<https://www.oecd.org/australia/TALIS-2013-country-note-Australia.pdf>, p. 3;
McKinsey&Company 2007, How the world’s best-performing school systems come out on top, McKinsey&Company,
<http://mckinseyonsociety.com/downloads/reports/Education/Worlds_School_Systems_Final.pdf>.
71 Australian Curriculum, Assessment and Reporting Authority 2017, Australian curriculum: general capabilities, ACER, Camberwell,
<https://www.australiancurriculum.edu.au/f-10-curriculum/general-capabilities>.
72 Australian Government Department of Education 2014, Review of the Australian curriculum: final report, Department of Education,
Canberra, <https://docs.education.gov.au/documents/review-australian-curriculum-final-report>, p. 3.
Australians, Melbourne, <https://www.fya.org.au/wp-content/uploads/2016/04/The-New-Basics_Update_Web.pdf>.

seek advice from industry through representative Industry can play a significant role in
associations and Industry Growth Centres (IGCs).74 demonstrating to students the career benefit
of a STEM education. Under the National
Ensuring students are motivated and STEM School Education Strategy, the STEM
Partnerships Forum has been established to
pursuing the skills they need to succeed in
bring together key industry and education
the future workforce leaders and raise awareness of the importance of
Low student expectations lead to low outcomes. STEM education in solving real-world problems
Recent analysis of individual Programme for and the relevance of STEM skills to a range
International Student Assessment (PISA) scores of careers.
of 500,000 students across 72 countries found
that student mindsets, such as motivation and Investing in targeted interventions
self-belief, have a greater impact on student
performance than any other factor – and double The need to lift student outcomes is most
the effect of socioeconomic background. The acute for students from socially disadvantaged
mindset that was most predictive of performance backgrounds. In both numeracy and literacy
was the ability to identify what motivation looks results, the difference between advantaged and
like in day-to-day life – including preparing for disadvantaged students is equivalent to around
class, doing more than expected, and working three years of schooling. While the highest
to perfection. socioeconomic quartile of students in Australia
performs significantly above the OECD average
Mindsets made the most difference for students (approximately one-and-a-half years), results for
either in low-performing schools or in lower Australian students in the lowest socioeconomic
socioeconomic quartiles. For students in schools quartile are significantly lower (approximately
with low average test scores, a well-calibrated one year).’ These gaps have not diminished in
motivation mindset is equivalent to vaulting into over a decade.76
a higher socioeconomic quartile.
There are also significant disparities in the
Increasing the ambition and motivation of performance of Australian schools and school
students is therefore an important goal for a systems, and an even greater variance in
world-class education system. This is particularly classroom performance. According to the
important for STEM subjects, because students analysis of PISA results conducted by the
perceive them to be difficult and among the Australian Council for Educational Research,
hardest subjects in which to achieve high marks. although Australian students generally perform
With universities dropping prerequisite well in digital literacy, there are clear differences
requirements in science and mathematics, in performance across geographic areas, with
one of the key incentives for students to study 25 per cent of students from remote schools
more challenging subjects in high school and having low proficiency compared with 13 per cent
in university has been removed. Between 1994 of students from provincial schools and
and 2012, the proportion of students studying 8 per cent of students in metropolitan schools.77
advanced mathematics fell from 16 per cent to International research on school system
9 per cent, replaced with a shift to mid-level and improvements emphasises that disparity in
entry-level mathematics.75 school starting points means that a one-size-fits-
74 R. Randall, CEO of ACARA, Personal Communication.

75 Kennedy, J, Lyons, T & Quinn, F 2014, ‘The continuing decline of science and mathematics enrolments in Australian high schools’,
Teaching Science, vol. 60, no. 2, pp. 34–46, <https://eprints.qut.edu.au/73153/1/Continuing_decline_of_science_proof.pdf>.
76 Australian Council for Educational Research 2017, Australian report card: time to address disadvantage is now, ACER, Canberra,
<https://rd.acer.org/article/australian-report-card-time-to-address-disadvantage-is-now>.
77 Global Entrepreneurship Monitor 2017, Global report 2016/17, GEM, London, <http://gemconsortium.org/report/49812>, p. 145;
based on comparison of overall satisfaction score for each element of the entrepreneurship system.

all model of intervention is ineffective. Instead, think about achievement in terms of growth, as
each school system needs to target interventions well as proficiency.
to specific cohorts of schools with different
A second opportunity to improve transparency
needs. For schools or school subsystems with
is to increase the ambition of Australian
significantly lower outcomes, this can mean
schools by increasing the level of challenge of
using more structured interventions, such
performance standards. The current national
as illustrative class outlines and suggested
minimum standards in NAPLAN are very low by
teaching guides to allow teachers and students
international standards. For example, if PISA
to focus on in-classroom learning, and focusing
standards in mathematics for Year 9 and Year 10
on lifting attendance.
students are compared with NAPLAN minimum
standards for Year 9 students, there appears to
Further improving transparency and be nearly a two-year differential.79
accountability across school systems Finally, designing and implementing targeted
Australia needs to build a strong evidence interventions for teacher professional
base to inform education innovations and development could be improved with better
improvements. The Australian Government has national teacher workforce data.
increased transparency and accountability for
school outcomes in the last decade through
the development of the National Assessment Recommendations
Program – Literacy and Numeracy (NAPLAN) and Recommendation 1: Government education
the creation of the MySchool website. policy makers should direct their efforts towards:
There is further room to improve the granularity • investing in quality teaching by improving
and use of data to drive performance the quality and content of in-service teacher
improvement. The National Education Evidence professional development programs to focus on
Base Report from the Productivity Commission –– a nationally agreed minimum number of
recommends improving evaluation and annual hours in discipline-specific training
dissemination of effective pedagogy. This would –– the teaching of 21st-century skills
allow education systems to quickly implement –– increasing quality of and emphasis
the best methods of teaching 21st-century skills, on feedback and appraisal of teacher
and improve monitoring of outcomes. performance
Two of the most significant evidence gaps –– selecting, developing and effectively
identified by the Commission’s report are resourcing high-performing teachers
Australia’s data on student achievement, and school leaders to act as mentors and
including measures to track and assess ‘value instructional leaders in their school or area
add’, and data that provide insight on what • monitoring the entry standards for initial
works best to improve outcomes.78 Addressing teacher education courses to ensure that they
the value-add data recommendations would be are sufficiently demanding to select students
a cultural shift in the way we think about student with the literacy and numeracy skills required
performance. Historically, teachers have focused for science, technology, engineering and
on a student’s achievement against expectations mathematics (STEM) teaching
for that year level. Increasingly, educators are
focusing on understanding how much a student
has learned, relevant to their individual starting
point. Value-add measures support teachers to
78 Productivity Commission 2016, National education evidence base: overview and recommendations, PC, Canberra,
<https://www.pc.gov.au/inquiries/completed/education-evidence/report/education-evidence-overview.pdf>.
79 Goss, P, Sonnemann, J, Chisholm, C & Nelson, L 2016, Widening gaps: what NAPLAN tells us about student progress, Grattan Institute,
Melbourne, <http://grattan.edu.au/wp-content/uploads/2016/03/937-Widening-gaps.pdf>, Figure 1.

• strengthening the quality of teacher education • optimising the interaction of industry with
for secondary STEM teachers through schools through the work of the STEM
requiring the completion of a discipline- Partnership Forum.
specific, non-teaching degree in addition to a
Recommendation 3: Improve transparency and
teaching degree
accountability across the system by raising the
• increasing the system-level focus on targeted ambition of the national minimum standards in
interventions to improve outcomes where National Assessment Program – Literacy and
student learning levels are significantly below Numeracy (NAPLAN) and building on these with
our national average through new standards focusing on higher levels of
–– providing tailored support to teachers in achievement.
the form of regular tracking of student
Endorsement A: ISA endorses the priority areas
improvement enabling rapid and evidence-
for national collaborative action of the National
based iteration of teaching practice
STEM School Education Strategy.
• instilling ‘motivation mindsets’ and a culture
of high expectations including through Endorsement B: ISA endorses the findings of the
–– communicating to secondary students the Productivity Commission’s National Education
level of school STEM study needed to enter Evidence Base Inquiry Report as an important
and successfully complete STEM-related step in ensuring Australia has the evidence base
courses at university and in vocational to innovate and improve in education.
education and training
–– reinstating prerequisites into those tertiary
courses in which discipline skills are
Strategic opportunity 1.2:
necessary
• ensuring future reviews of the Australian Australia’s vocational education and
Curriculum for STEM subjects will continue training system can be made responsive
to meet Australia’s innovation, science and to new priorities presented by innovation
research education needs and be informed of
industry expectations through consultation
with industry. Rationale
Recommendation 2: Prepare students for
Vocational education and training (VET) is a
post-school science, technology, engineering
major part of Australia’s education system and it
and mathematics (STEM) qualifications and
will play a significant role in helping Australians
occupations, by:
adapt to changing skill needs throughout their
• exploring opportunities to encourage careers.
participation in higher-level STEM subjects in
high school In 2016, there were over 770,000 VET program
completions (Certificate I or higher),80 offered by
• strengthening education in skills such
a diverse mix of training providers. Of the 2016
as hypothesis-driven problem solving,
program completions, 430,000 were delivered
systematic enquiry and logical thinking
through private providers; 215,000 were
• improving measurement of the scope of out- delivered by technical and further education
of-field teaching in STEM and implementing (TAFE) institutions; 57,000 were delivered by
measures to reduce the level of out-of-field
teaching
80 National Centre for Vocational Education Research 2017, Australian vocational education and training statistics: total VET students
and courses 2016, NCVER, Adelaide,
<https://www.ncver.edu.au/publications/publications/all-publications/total-vet-students-and-courses-2016>.

schools; and 73,000 were delivered by other GDP between 2015 and 2030 (Figure 11). Access
provider types such as community providers.81 to a highly skilled workforce helps businesses
to improve performance and reduces labour
VET is an important source of skilled workers
market adjustment costs. It also minimises flow-
for Australian businesses and for start-ups,
on costs to consumers brought about by skills
especially in trades and hospitality. In 2016,
shortages.86
53 per cent of employers surveyed by the
National Centre for Vocational Education The VET system’s ability to rapidly adapt to
Research used the VET system and 76 per cent these changing skill requirements is critical for
were satisfied that VET training fulfilled their industries, occupations and new businesses.
skills requirements.82 VET is particularly Already, the most common cause of employer
important in practical skills-intensive industries dissatisfaction is that courses do not sufficiently
such as mining, manufacturing, and property teach relevant skills.
and business services. These industries have
Australian and state and territory governments
higher expenditure on structured training as a
will play a key role in ensuring Australia’s VET
share of gross wages and salaries, and provide
system adapts to these changes. Although
more training per employee.83
training is delivered by public, private and
The importance of VET-trained workers will community providers, governments influence
increase as industries adapt to new demands the system through funding, regulation and
and technologies and require higher skills and information provided to the community. How
more frequent skill updates. Demand for VET- governments strategically engage with industry
level qualifications in New South Wales (NSW) to ensure training aligns to emerging work and
alone is projected to increase from around skills demands is also vital.
30 per cent of workers in 2015 to 45 per cent of
COAG’s establishment of the Australian Industry
workers in 2036.84
and Skills Committee in 2016 put industry at
VET will also be critical to ensuring Australian the centre of training package development.
workers can gain the skills to transition from This committee is a collaboration of industry
jobs affected by automation, and take up the and government focused on simplifying and
new business and work opportunities presented demystifying the VET system, amplifying the
by new technologies. Seventy per cent of voice of industry in skills training development,
young people currently enter the workforce and building employer confidence in VET
in jobs that will be affected by automation.85 qualifications.
Displaced and inactive workers represent a
Governments could consider funding innovations
clear economic and social cost. Successful
such as linking pricing of courses to market
transition of workers affected by automation
demand for skills. This could include aligning
to high value-added work opportunities could
Higher Education Loan Program (HELP) pricing
cumulatively add an additional $1.2 trillion to
to employment and wage benefits, and
81 National Centre for Vocational Education Research 2017, Australian vocational education and training statistics: total VET students
and courses 2016, NCVER, Adelaide,
<https://www.ncver.edu.au/publications/publications/all-publications/total-vet-students-and-courses-2016>.
82 National Centre for Vocational Education Research 2015, Employers’ use and views of the VET system 2015 infographic: text only,
NCVER, Adelaide, <http://www.voced.edu.au/content/ngv%3A70414>.
83 Toner, P, Marceau, J, Hall, R & Considine, G 2004, Innovation agents: vocational education and training skills and innovation in
Australian industries and firms, NCVER, Adelaide, <https://www.ncver.edu.au/__data/assets/file/0018/5661/nr1011.pdf>.
84 Jobs for NSW 2016, Jobs for the future: Adding 1 million rewarding jobs in NSW by 2036, Jobs for NSW, Sydney, <https://www.
jobsfornsw.com.au/__data/assets/pdf_file/0020/90740/Jobs-for-the-future-full-report-August-2016.pdf>. Analysis for NSW to 2036.
85 AlphaBeta 2017, The new work order: ensuring young Australian have skills and experience for the jobs of the future, not the past,
Foundation for Young Australians, Melbourne,
<http://www.fya.org.au/wp-content/uploads/2015/08/fya-future-of-work-report-final-lr.pdf>.
86 AlphaBeta 2017, The automation advantage, AlphaBeta, Sydney, <http://www.alphabeta.com/the-automation-advantage>, p. 18.

Figure 11 Cumulative economic gain from transitioning workers to new skills, 2015–30
GDP = gross domestic product

a Cumulative additional GDP calculated assuming all potential productivity savings from automation are reinvested into the workforce with
high productivity rate. Hours worked per capita remain unchanged. The green area between the two lines is the $1.2 trillion cumulative
addition to GDP.
b Work hours reduced involuntarily and workers displaced without being absorbed into other jobs.
Source: AlphaBeta 2017, The automation advantage, AlphaBeta, Sydney, <http://www.alphabeta.com/the-automation-advantage>, p. 15.
outcomes-based funding similar to the ‘Gainful and increased information available for students
Employment’ model in the United States.87 on course quality through the Myskills website.90
A pressing priority in recent years has been ISA supports the proposal, currently under
the reform of the VET-FEE HELP scheme88 to review by the Australian Government Department
achieve sufficient protection of students and of Education and Training, to issue an ‘approved
accountability and compliance monitoring for course list’ for Australian Government loans
providers, and to limit cost blowouts.89 Recent where the approved course list is linked to
changes made under the new VET student loans employment outcome metrics.91 There may be
scheme are a promising step towards greater further opportunities to improve compliance and
accountability for providers, including options quality control by empowering the Australian
for Australian Competition and Consumer Skills Quality Authority to more easily shut down
Commission intervention to shut down non- non-compliant providers rather than relying on
compliant providers, reforms to loan issuance, external support from the Australian Competition
and Consumer Commission, and expanding
87 Under the Gainful Employment Rule, to be eligible for funding under student assistance programs, an educational program must
lead to a degree at a non-profit or public institution, or must prepare students for ‘gainful employment in a recognized occupation’
<https://studentaid.ed.gov/sa/about/data-center/school/ge>.
88 Government loan scheme that helps eligible students to pay all or part of their tuition fees.
89 Australian National Audit Office 2016, Administration of the VET FEE-HELP Scheme, ANAO, Canberra,
<https://www.anao.gov.au/work/performance-audit/administration-vet-fee-help-scheme>.
90 Australian Government Department of Education and Training 2016, VET FEE-HELP reform factsheet, DET, Canberra,
<https://docs.education.gov.au/documents/vet-fee-help-reform-factsheet>.
91 Australian Government Department of Education and Training 2016, Review of the VET Student Loans course list and loan caps
methodology, discussion paper, DET, Canberra,
<https://docs.education.gov.au/system/files/doc/other/discussion_paper_course_list_loan_cap_methodology_0.pdf>.

the granularity of the Myskills website data on Recommendation 5: Continue and expand
provider quality. current vocational education and training (VET)
reforms to:
Because the VET sector is focused on preparing
people for work, either as employees or • optimise the supply-side potential of the
employers, it plays a key role in ensuring Skilling Australia Fund, for example by
Australians can harness the opportunities encouraging industry employers and VET
from innovation. A serious examination of how providers to consult with Industry Growth
the sector can best play such a role should be Centres in identifying expected skills
undertaken, building on recent research by shortages in the future work requirements of
the National Centre for Vocational Education high-growth sectors
Research.92 • link VET student loan funding to employment
outcomes
• strengthen the powers of the regulator:
Recommendations Australian Skills Quality Authority
Recommendation 4: Task the Australian • provide improved information to students on
Government Department of Education and provider quality.
Training to undertake a review of vocational
education and training (VET) and report back
within 12 months on:
• a strategy to make the sector increasingly
responsive to new priorities presented by
innovation, automation and new technologies
• ensuring the Australian VET system will be
internationally competitive in the provision
of initial skills training, in supporting a life of
learning and helping businesses to compete,
and ensuring VET interfaces and intersects
productively with other parts of the higher
education system
• recommendations for metrics of VET success
to be evaluated by 2022, including via surveys
of employers regarding skills relevance,
actual completion rates and employment on
graduation
• increasing the amount and granularity of
information made available to students.
92 Beddie, F & Simon, L 2017, VET applied research: driving VET’s role in the innovation system, National Centre for Vocational Education
Research, Adelaide, <https://www.ncver.edu.au/publications/publications/all-publications/vet-applied-research-driving-vets-role-
in-the-innovation-system>.

case study 2 Academy Xi and the changing face of education
Digital skills are in high demand by masterclasses and workshops for individual
Australian employers, but keeping pace students and corporate group training.
with this dynamically changing area can Their agile model means they can rapidly
be challenging for conventional education update subjects and course material as
institutions. learning needs or content changes. Through
their social impact arm, Xi Act, the start-up
Conventional institutions frequently regulate
helps to equip non-profit organisations,
curricula and have comparatively long lead
including UNICEF, Remarkable, Cerebral
times to update courses and material.
Palsy Alliance and WWF, with digital skills.
Recognising this situation as an opportunity, Investors agreed the company has strong
Ben Wong and Charbel Zeaiter founded growth prospects, providing US$1.7 million
Academy Xi, an edutech start-up focused in funding in 2017 to enable Academy Xi to
exclusively on digital economy skills in areas expand into Singapore in 2018. Academy
such as service design, user experience Xi believes in empowering people with
design, augmented and virtual reality practical, actionable skills that will lead to
design, growth marketing and product improving life for others and, as their vision
management. states, hopes to ‘ultimately change the
Academy Xi offers a wide variety of full-time world.’
courses, part-time courses, bootcamps,

IMPERATIVE 2
Industry: Ensure Australia’s ongoing prosperity
by stimulating high-growth firms and improving
productivity
ISA’s vision is that by 2030 • Strategic opportunity 2.3: The opportunities

presented by the ‘fourth wave’ of the internet
Australia will accelerate growth and
can be captured by strengthening Australia’s
exports by Australian businesses digital economy
by strengthening a competitive • Strategic opportunity 2.4: Business
and productive domestic business productivity in all sectors can be facilitated by
environment. healthy levels of competition
• Strategic opportunity 2.5: Australia’s
innovation investment and talent can be
Strategic opportunities strengthened by improving access to global
talent pools and fostering greater gender and
for government ethnic diversity.
There are five strategic opportunities for Australia needs more innovation-driven
government to accelerate growth, innovation and productivity to generate GDP growth and keep
exports among Australian companies by 2030: our economy strong. We need more innovation-
• Strategic opportunity 2.1: Business R&D active companies because they are more
investment can be increased by better profitable93 and productive,94 and we need
targeting the Research and Development Tax more export-active companies because they are
Incentive (R&DTI) program, and increasing more competitive and more likely to engage in
support for direct grant programs that target innovation.95 We also need more high-growth
national priorities firms because most new jobs in our economy are
• Strategic opportunity 2.2: The growth created by companies that scale fast.96
of exporting firms, particularly young
high-growth firms, can be encouraged by
increasing Export Market Development Grants
funding, and by expanding and making better
use of trade agreements
93 Office of the Chief Economist 2016, Australian innovation system report, Australian Government Department of Industry, Innovation and
Science, Canberra, <https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-Innovation-System.aspx>.
94 Ernst & Young 2013, Delivering a step change in organisational productivity: findings from the Australian Oil & Gas Productivity and
Innovation Survey, Ernst & Young, <http://www.ey.com/Publication/vwLUAssets/Delivering_a_step_change_in_organisational_
productivity/$FILE/Delivering_a_step_change_in_org_prod.pdf>.
95 Tuhin, R 2016, Modelling the relationship between innovation and exporting: evidence from Australian SMEs, Australian Government
Department of Industry, Innovation and Science, Canberra, <https://industry.gov.au/Office-of-the-Chief-Economist/Research-Papers/
Documents/2016-Research%20Paper-3-Modelling-the-relationship-between-innovation-and-exporting-Evidence-from-Australian-
SMEs.pdf>.
96 Office of the Chief Economist 2016, Australian innovation system report, Australian Government Department of Industry, Innovation and
Science, Canberra, <https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-Innovation-System.aspx>.

Strategic opportunity 2.1: Australian Government support for innovation
has remained relatively stable. Australian
Government R&D expenditure has a medium-
Business research and development term average of 0.63 per cent as a share of
investment can be increased by GDP, declining from 0.7 per cent of GDP to
better targeting the Research and 0.58 per cent of GDP between 1992 and 2016
Development Tax Incentive program, (Figure 12).
and increasing support for direct grant
In 2016–17, the Australian Government spent
programs that target national priorities
$10.1 billion on support of science, research and
innovation (Figure 13), directed through:
• R&DTI – the largest single innovation support
Rationale program which provides a tax advantage for
Despite being in a global innovation race, businesses undertaking R&D
Australia remains behind our global peers in • research block grants – which provide support
GERD; we rank 20th in the OECD, with spending for university-based R&D activity
of 1.9 per cent of GDP (Figure 7, on page 17). • competitive investigator-led research grant
Australia’s shortfall is largely in the private programs – including the Australian Research
sector, which contributes 1.0 per cent to Council and the National Health and Medical
Australia’s GERD spending as a percentage of Research Council
GDP.97 Although some of this shortfall reflects • publicly funded research agencies – including
a different industrial structure in Australia, the CSIRO, Defence Science and Technology
trend over time is of concern. Although business Group, and Australian Nuclear Science and
expenditure on research and development Technology Organisation
(BERD) as a percentage of GDP in Australia • innovation support programs that are
increased from 0.64 per cent to 1.37 per cent primarily mission-directed – including the
between 1992 and 2008, it tailed off after the Cooperative Research Centres program,
Global Financial Crisis to 1.01 per cent in 2015 Medical Research Future Fund, Biomedical
(Figure 12). The decline from 2008 was mainly Translation Fund, Australian Renewable
due to reduced mining and manufacturing Energy Agency, Entrepreneurs’ Programme,
expenditure. Investment increased in some other Industry Growth Centres Initiative, and Rural
sectors, but did not compensate for the decline. Research and Development Corporations.
As noted in Section A of this report, BERD in
Australia is going against the global trend for
national BERD growth to exceed GDP growth.98
Since the turn of the millennium, the average
annual growth rate in BERD in absolute terms
has been approximately 6 per cent, which ISA
believes should set a minimum benchmark for
future aspirations.
The volatility of business expenditure has
not been matched in the public sector, where
97 Organisation for Economic Co-operation and Development 2017, Main science and technology indicators, OECD, Paris,
<http://www.oecd.org/sti/msti.htm>; Australian Bureau of Statistics 2017, Research and experimental development, businesses,
Australia, 2015–16, cat. no. 8104, ABS, Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/8104.0>.
98 Based on Australian Bureau of Statistics 2017, Research and experimental development, businesses, Australia, 2015–16,
cat. no. 8104, ABS, Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/8104.0>; Innovation and Science Australia 2016,
Performance review of the Australian innovation, science and research system, ISA, Canberra,

Figure 12 Australian business and government research and development expenditure,
1992–2016
BERD = business expenditure on research and development; R&D = research and development
Note: BERD has only been reported biannually since 2011. Data for missing years are an average of each adjacent year (e.g. BERD for 2012 is
the average of 2011 and 2013).
Source: Australian Bureau of Statistics 2017, Research and experimental development, businesses, Australia, 2015–16, cat. no. 8104, ABS,
Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/8104.0>; Australian Government Department of Industry, Innovation and Science
2017, Science, research and innovation budget tables, DIIS, Canberra, <https://industry.gov.au/innovation/reportsandstudies/Pages/
SRIBudget.aspx>.
Figure 13 Australian Government science, research and innovation expenditure, 2016–17
AAO = Australian Astronomical Observatory; AIATSIS = Australian Institute of Aboriginal and Torres Strait Islander Studies;
ACIAR = Australian Centre for International Agricultural Research; AIMS = Australian Institute of Marine Science; ANSTO = Australian Nuclear
Science and Technology Organisation; ARC = Australian Research Council; ARENA = Australian Renewable Energy Agency; BoM = Bureau
of Meteorology; BRII = Business Research Innovation Initiative; BTF = Biomedical Translation Fund; CRC = Cooperative Research Centre;
CSIRO = Commonwealth Scientific and Industrial Research Organisation; DAWR = Australian Government Department of Agriculture and
Water Resources; DCA = Australian Government Department of Communication and the Arts; DET = Australian Government Department
of Education and Training; DIIS = Australian Government Department of Industry, Innovation and Science; DIRD = Australian Government
Department of Infrastructure and Regional Development; DOD = Australian Government Department of Defence; DOH = Australian
Government Department of Health; DSTG = Defence Science and Technology Group; DVA = Australian Government Department of Veterans’
Affairs; GA = Geoscience Australia; GBRMPA = Great Barrier Reef Marine Park Authority; GIS = Global Innovation Strategy; MRFF = Medical
Research Future Fund; NAL = National Acoustic Laboratories; NCRIS = National Collaborative Research Infrastructure Strategy;
NHMRC = National Health and Medical Research Council; NMI = National Measurement Institute; PFRA = publicly funded research agencies;
R&D Tax = Research and Development Tax Incentive; RBG = research block grant; RIRDC = Rural Industries Research and Development
Corporations; RRDC = Rural Research and Development Corporations
Source: Australian Government Department of Industry, Innovation and Science 2017, Science, research and innovation budget tables, DIIS,
Canberra, <https://industry.gov.au/innovation/reportsandstudies/Pages/SRIBudget.aspx>; design by ISA.

Figure 13 (continued)

Refocusing government support for
Figure 14 Percentage of direct vs indirect
business research and development
government funding for business
The heavy reliance on ‘indirect’ funding research and development, 2013
measures, such as the R&DTI, to support
business R&D is a characteristic that Australia
shares with only a few other nations (Figure 14).
Although such schemes have the advantage
of being relatively simple to administer, there
is concern about the extent to which they
generate genuine additionality in R&D activity.99
Furthermore, there is emerging evidence in the
international literature questioning the impact of
R&D tax incentives on productivity growth.100
Against this backdrop, the Australian
Government commissioned a review of the
R&DTI. The review panel was asked to find
opportunities to improve the effectiveness and Note: Data on indirect funding for Israel unavailable; data for
Australia available from 2011 and United States from 2012.
integrity of the R&DTI, including encouraging
Source: Organisation for Economic Co-operation and Development
additionality. The 2016 review found that ‘the 2017, Measuring tax support for R&D and innovation, OECD, Paris,
programme falls short of meeting its stated <www.oecd.org/sti/rd-tax-stats.htm>; Organisation for Economic
Co-operation and Development 2017, Main science and technology
objectives of additionality and spillovers’.101 indicators, OECD, Paris, <www.oecd.org/sti/msti.htm>.
It made six recommendations to improve the
programme and encourage additional R&D.
to 1.0 for large firms.102 In many cases SMEs are
The consultations undertaken by ISA to develop
also more sensitive to the R&DTI than larger and
this plan confirmed the importance of the R&DTI,
more established firms: 54 per cent of SMEs’
particularly for small and medium enterprises
decisions regarding R&D are influenced by the
(SMEs). SMEs generate greater additionality
R&DTI program, versus 34 per cent of decisions
per dollar spent on R&D tax incentives by
for larger entities.103 ISA consultations reiterated
governments compared with large businesses;
concerns about the additionality generated by
SMEs generate between 0.9 and 1.5 additional
the program.
dollars per dollar of tax forgone, versus just 0.3
99 Mazzucato, M 2017, Mission-oriented innovation policy: challenges and opportunities, Institute for Innovation and Public Purpose,
London, <https://www.ucl.ac.uk/bartlett/public-purpose/sites/public-purpose/files/moip-challenges-and-opportunities-working-
paper-2017-1.pdf>.
100 A summary of the relevant literature can be found in: Organisation for Economic Co-operation and Development 2015, The future of
productivity, OECD, Paris, <http://www.oecd.org/eco/OECD-2015-The-future-of-productivity-book.pdf>, p. 100.
101 Ferris, B, Finkel, A & Fraser, J 2016, Review of the R&D Tax Incentive, Australian Government Department of Industry, Innovation and
Science, Canberra, <https://industry.gov.au/innovation/InnovationPolicy/Research-and-development-tax-incentive/Pages/R-and-D-
Tax-Incentive-Review-report-and-submissions.aspx>.
102 An SME is defined as R&D expenditure of $2 million or less, which is closely aligned with the ABS definition of SMEs (firms with fewer
than 200 employees); Ferris, B, Finkel, A & Fraser, J 2016, Review of the R&D Tax Incentive, Australian Government Department of
Industry, Innovation and Science, Canberra, <https://industry.gov.au/innovation/InnovationPolicy/Research-and-development-tax-
incentive/Pages/R-and-D-Tax-Incentive-Review-report-and-submissions.aspx>.
103 Ferris, B, Finkel, A & Fraser, J 2016, Review of the R&D Tax Incentive, Australian Government Department of Industry, Innovation and
Science, Canberra, <https://industry.gov.au/innovation/InnovationPolicy/Research-and-development-tax-incentive/Pages/R-and-D-
Tax-Incentive-Review-report-and-submissions.aspx>.

case study 3 Textor Technologies: creating new jobs via innovation
Textor Technologies is proof of the power Support from government programs
of a big idea. In 2000, Textor was a small incentivising research and collaboration
and struggling Victorian manufacturing was critical to the company’s improvement
company, producing limited volumes of journey and growth. The Research and
textiles for local suppliers in hygiene and car Development (R&D) Tax Incentive enabled
manufacturing. Textor to expand its R&D capability, now
employing 13 engineers and two PhDs
Phillip Butler, then a director and now
focused on product and process
company chair, imagined a different future.
development. Textor also partnered with
He believed that with higher-value products
CSIRO to develop novel 3D moisture-trapping
and higher-volume production facilities, the
fabric. This new material is used in the
company could be a global exporter.
millions of nappies produced in Sydney, the
Butler knew that product and process United States and Russia by global company
innovation and an export strategy were Kimberly-Clark.
critical to a turnaround. Textor Technologies
These innovations have transformed Textor
developed innovative textiles designed to
Technologies into a healthcare and hygiene
control moisture absorption that prevent
leader, exporting across the Asia Pacific.
leakage in products such as nappies, wound
Textor now manufactures 100 million square
pads and other hygiene products, ensuring
metres of moisture-trapping fabric each year.
skin remains dry and in good condition.
The business has grown by 300 per cent,
The company also invested $17 million to
and has opened up a multinational textile
upgrade its factory in Tullamarine to a state-
value‑chain.
of-the-art, automated facility.

With the benefit of this feedback, and new data Increasing the use of mission-
gathered as part of the ISA performance review directed support
and the development of the 2030 Plan, ISA has
identified two opportunities to improve the Several nations are looking anew at the potential
impact of the recommendations in the Review of for government to stimulate public and private
the R&D Tax Incentive: sector innovation through mission-oriented,
• The cap referred to in Recommendation 3 impact-focused programs.105 This is supported
of the review of the R&DTI should be set by a growing body of evidence highlighting the
at $4 million per year, and a maximum role that governments have historically played
cumulative refund of $40 million per company in laying the foundations for breakthrough
should be applied. innovations in a range of fields, such as the
internet.106
• The threshold referred to in
Recommendation 4 of the review of the Australia currently makes use of a range of
R&DTI should be replaced with a trigger set at mission-driven, directly funded programs
1 per cent of total annual expenditure, such to foster business innovation (e.g. the
that all R&D expenditure is claimable (subject Cooperative Research Centres (CRC) Programme,
to any other limits) once the trigger level is including CRC Projects, and the Entrepreneurs’
reached. Programme). These currently constitute a
comparatively small fraction of total support, but
ISA is also aware that digital transformation
there is evidence they are generating additional,
projects have resulted in an increasing number
strategically valuable investment in R&D from
of companies making claims for software-related
businesses. For example, one review of CRCs in
activities under the R&DTI. However, although
2012 calculated that net economic benefit to the
such software development projects may be
Australian community exceeded costs by a factor
innovative, in many cases R&D activities may
of 3.1.107
form only a small part of the overall project. The
definition of R&D in the Industry Research and
Development Act 1986 is specific and drawn
from the OECD Frascati Manual.104 Further work is
already under way in this important area to provide
certainty to companies working with software.
104 According to the Industry Research and Development Act 1986, for software activities to be considered to be R&D, specific
requirements need to be met including the objective of a scientific and/or technological advance, and the systematic resolution of a
scientific and/or technological uncertainty; Organisation for Economic Co-operation and Development 2015, Frascati manual 2015:
guidelines for collecting and reporting data on research and experimental development, OECD, Paris,
<http://dx.doi.org/10.1787/9789264239012-en>.
105 See, for example: High Level Group on maximising the impact of EU Research & Innovation Programmes 2017, LAB–FAB–APP:
investing in the European future we want, European Commission, Luxembourg, <https://ec.europa.eu/research/evaluations/pdf/
archive/other_reports_studies_and_documents/hlg_2017_report.pdf>; or the United Kingdom Government 2017, Building our
industrial strategy: green paper, <https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/611705/
building-our-industrial-strategy-green-paper.pdf>.
106 Mazzucato, M & Semieniuk, G 2017, ‘Public financing of innovation: new questions’, Oxford Review of Economic Policy, vol. 33, no. 1,
pp. 24–48.
107 The Allen Consulting Group 2012, The economic, social and environmental impacts of the Cooperative Research Centres
Program, report to the Department of Industry, Innovation, Science, Research and Tertiary Education, Allen Consulting Group,
<https://www.business.gov.au/~/media/Business/CRC/Cooperative-Research-Centres-Programme-Economic-Social-and-
Environmental-Impacts-2012-PDF.pdf?la=en>.

case study 4 CRC for Sheep Industry Innovation: bringing sheep farming
into the technological age
Collaboration between industry and research their rams are carrying the right combination
participants of the Cooperative Research of genes.
Centre for Sheep Industry Innovation (Sheep
The real-world usefulness of RamSelect
CRC) is giving farmers new technological
Plus is best demonstrated by the fact that
tools to aid them in the age-old practice of
sheep breeders are embracing it in droves.
sheep breeding.
About 14,000 rams from 180 studs were
The Sheep CRC counts sheep breeders, listed on the website within the first five
producers, processors, retailers, researchers months of its launch. Now in its third year,
and industry advisors among its 41 it is transitioning to a user-pays model to
participants: Meat and Livestock Australia, ensure that it can continue to be delivered in
Australian Meat Processors, Sheepmeat a commercially sustainable way beyond the
Council of Australia and WoolProducers life of the CRC.
Australia represent key industry
The Sheep CRC demonstrates the key role
stakeholders; Murdoch University, the
that well-focused collaboration can play
University of New England, and the Western
in developing complex and innovative
Australian, Victorian and New South Wales
technologies with the potential to
state governments contribute a wide range
revolutionise farming practices; all farmers
of research expertise.
and producers can benefit from access to
The Sheep CRC combines digital technology accurate, reliable and predictive data for
with DNA testing, and uses climate decision-making.
information and biophysical models to
provide farmers with better access to data
to help inform their decision-making around
managing healthy and productive sheep.
The first of the digital products released
by the CRC was RamSelect. This is a web-
based genetic selection app that helps take
the guesswork out of selecting rams with
the exact genetics that match the breeder’s
purpose – whether that be wool production,
meat quality or other factors that affect the
profitability of a flock. Farmers are able to
compare sheep from across Australia via an
intuitive and easy-to-use platform to ensure

More recently, the Australian Government has by government support for business R&D should
established independently run IGCs to accelerate be strengthened by:
growth in promising industry sectors with high • ensuring, at a minimum, that total government
strategic, economic and export potential. The support for science, research and innovation
IGCs have four areas of focus: does not fall below its medium-term average
• identifying regulations that are unnecessary of 0.63 per cent of gross domestic product
or over-burdensome for growth sectors and • implementing the recommendations of
impede their ability to grow, and suggesting the 2016 Review of the R&D Tax Incentive
possible reforms to improve the effectiveness, integrity and
• improving engagement between research collaboration impact of the program, with the
and industry, and within industry, to achieve following adjustments
stronger coordination and collaboration of –– the cap referred to in Recommendation 3 of
research and stronger commercialisation the report should be set at $4 million per
outcomes in the key growth sectors year, and a maximum cumulative refund of
• improving the capability of the key growth $40 million per company should be applied
sectors to engage with international markets –– the threshold referred to in
and access global supply chains Recommendation 4 of the report should
• improving the management and workforce be replaced with a trigger set at 1 per cent
skills of key growth sectors. of total annual expenditure, such that all
R&D expenditure is claimable (subject to
IGCs have been established in six areas of any other limits) once the trigger level is
competitive strength and strategic priority: reached
advanced manufacturing; cyber security;
• prioritising new and redirected investment
food and agribusiness; medical technologies
in stimulating business R&D to programs
and pharmaceuticals; mining equipment,
that directly support activity in areas of
technology and services; and oil, gas and energy
competitive strength and strategic priority
resources. While it is too early to fully evaluate
(e.g. Cooperative Research Centres – CRCs,
the effectiveness of the IGCs, ISA believes that
CRC Projects, Entrepreneurs’ Programme and
they are already building on their independent
Industry Growth Centres).
status and unique insights to play a key role in
directing government support to young firms,
SMEs or research-intensive large firms in sectors
of competitive strength and strategic priority. Strategic opportunity 2.2:
National Missions, discussed in Imperative 5,
are another valuable mechanism through which The growth of exporting firms,
government can drive innovation in priority particularly young high-growth firms,
areas. can be encouraged by increasing
Export Market Development Grants
funding, and by expanding and making
Recommendations better use of trade agreements
Recommendation 6: Adopt as the top priority
of innovation policy the reversal of the current
decline in business expenditure on research and Rationale
development, with a headline goal of achieving a
Exporting is critical to the national economy.
medium-term growth rate not less than that seen
Australia is most globally competitive in export
in 1999–2015. The contribution to this goal made
sectors such as mining, agriculture, tourism
and education. Exporting companies expand
economic activity by bringing in new income.
They are also more likely to be high-performing

and innovative and have stronger jobs growth manufacturing market, down from 0.64 per cent
potential.108 in 2000.112
Australia has significant potential to increase our Australia’s opportunity for improved
global export share. This is particularly the case performance in non-mineral export markets is
for non-mining sectors and high-growth firms, illustrated by comparison with Canada. Australia
and in exports to emerging and rapidly growing has a similar profile to Canada in terms of
Asian markets in our region. Governments can population size, GDP per capita and annual
enable this growth by expanding free trade wages.113 Yet Canada captures 4.2 per cent of
agreements and facilitating companies’ ability to global agricultural market share, even though
leverage them. They can also increase access to Canada has less arable land than Australia114
export programs targeted at high-growth firms, and agriculture contributes to a higher share of
particularly SMEs. GDP in Australia.115 Similarly, in manufacturing,
Canada outperforms Australia by a factor
of four, capturing 2.4 per cent of the global
Creating the conditions to increase exports
manufacturing export market.116
Australia should be ambitious about increasing
Governments can stimulate export activity by
our share of global exports. The Australian
entering into new trade agreements and better
economy is the 14th largest in the world,109 but
capitalising on existing ones. Australia has
ranks only 25th for share of global exports.110 The
recently negotiated deals with China, Japan and
mining sector is the exception, in which we rank
Korea. This is a promising development with
highly capturing nearly 29 per cent of the world
good initial results (e.g. a 12 per cent rise in
export market for minerals. This has significantly
agriculture exports to Korea).117 Greater gains
increased from 2000, when we had 12.7 per cent
are expected to accrue from the China–Australia
of the world export market.111 Other sectors do
Free Trade Agreement with scheduled periodic
not achieve the same rate of export success.
eliminations of tariffs through to 2026.118
Australia has 2.8 per cent of worldwide market
However, Australia has yet to conclude a free
share in agriculture, down from 3.15 per cent
trade agreement with India, and will need new
in 2000, and only 0.53 per cent of the global
SMEs.pdf>.
109 World Bank 2017, GDP ranking, World Bank, Washington, DC, <https://data.worldbank.org/data-catalog/GDP-ranking-table>.
110 Central Intelligence Agency 2017, The world factbook: exports, CIA, Washington, DC,
<https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html>.
111 Australia’s performance in exports of minerals (non-energy); United Nations 2017, UN Comtrade, UN Statistics Division, New York,
<https://comtrade.un.org/data>.
112 United Nations 2017, UN Comtrade, UN Statistics Division, New York, <https://comtrade.un.org/data>.
113 Australia: GDP totals US$1.4 trillion, Canada US$1.8 trillion; the population of Australia is 24 million people, Canada 36 million
people; GDP per capita in Australia is US$59,477, Canada US$50,151; annual wages in Australia are US$44,000, Canada US$38,000;
IHS Markit 2017, Global economy, IHS Markit, London,
<http://connect.ihs.com/DataSetBrowser/ShowDataSet?dataset=Global%20Economy>.
114 Australia’s proportion of arable land is 6.11%; Canada’s is 5.06%; World Bank 2017, Arable land, World Bank, Washington, DC,
<https://data.worldbank.org/indicator/AG.LND.ARBL.ZS>.
115 IHS Markit 2017, Global economy, IHS Markit, London,
<http://connect.ihs.com/DataSetBrowser/ShowDataSet?dataset=Global%20Economy>.
116 United Nations 2017, UN Comtrade, UN Statistics Division, New York, <https://comtrade.un.org/data>.
117 Worthington, B 2016, Winners and losers from first years of free trade agreements with China, Japan and Korea, Australian
Broadcasting Corporation, <http://www.abc.net.au/news/2016-11-28/winners-losers-free-trade-agreements-agriculture/8053336>.
118 Australian Government Department of Foreign Affairs and Trade 2017, China–Australia Free Trade Agreement: outcomes at a glance,
DFAT, Canberra, <http://dfat.gov.au/trade/agreements/chafta/fact-sheets/pages/key-outcomes.aspx>.

agreements with the European Union and the added by big businesses in Australia’s private
United Kingdom after Brexit.119 sector between 2012 and 2016 were from SMEs
scaling to become large businesses (Figure 16).
The Australian Government can also ensure
Australian companies are not disadvantaged Export growth is also largely driven by high-
in the regulatory requirements for exporting. growth firms in Australia (Figure 17).123
World Bank analysis shows that Australian
Given the role of exporting in stimulating
documentary compliance obligations are heavy,
innovation,124 there is clear value in increasing
relative to peers, rating Australia 32nd of OECD
the number of high-growth firms accessing
countries for the efficiency of its processes.120
export markets. However, a common barrier to
This means that Australian businesses face
exporting for smaller firms is the knowledge,
higher average time and costs (Figure 15) for
time and resources involved in developing an
exporting and importing processes. The average
export strategy. This will be a more significant
time to complete border compliance for exports
issue in future, as both the opportunity and
is 36 hours in Australia compared with less
complexity of export markets expands. The rise
than 15 hours among other OECD countries
of Asian economies is creating significant new
(Figure 15b).
economic opportunities with the consuming
class in Asia forecast to grow from 552 million
Accelerating export opportunities for to 1.2 billion households by 2030.125 These
high‑growth firms economies are also urbanising, and in the
process creating mega-cities. The McKinsey
Increasing the export activity of high-growth
Global Institute estimates that by 2025, half
firms – in particular, SMEs – poses significant
the world’s economic growth will come from
potential upsides for the Australian economy.
440 cities, including little-known places such as
High-growth employment firms121 contributed Kumasi in Ghana and Santa Catarina in Brazil.126
about 46 per cent of net positive employment The complexity of entering emerging markets
growth in 2004–05 to 2011–12, despite is that they have distinct cultural, linguistic,
representing only 9 per cent of all firms.122 In business and regulatory environments at the
particular, SMEs growing to become large firms city, regional and country level.
add many jobs to the economy; 146,000 jobs
119 Di Lieto, G 2017, ‘Brexit, Trump and the TPP mean Australia should pursue more bilateral trade agreements’, The Conversation,
17 January, <https://theconversation.com/brexit-trump-and-the-tpp-mean-australia-should-pursue-more-bilateral-trade-
agreements-71330>.
120 Organisation for Economic Co-operation and Development 2017, OECD economic surveys: Australia – March 2017, OECD, Paris,
<https://www.oecd.org/eco/surveys/Australia-2017-OECD-economic-survey-overview.pdf>.
121 Firms with at least five employees and turnover higher than $75,000 that achieve more than 20 per cent average annualised growth in
the number of full-time equivalent employees over a three-year period.
122 Office of the Chief Economist 2017, Australian innovation system report, Australian Government Department of Industry, Innovation
and Science, Canberra,
<https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-Innovation-System.aspx>.
123 Hendrickson, L 2016, The contribution of high-growth firms to the economy, Australian Government Department of Industry,
Innovation and Science, Canberra, <https://industry.gov.au/Office-of-the-Chief-Economist/Events/Documents/The%20
contribution%20of%20high%20growth%20firms%20to%20the%20economy.pdf>.
SMEs.pdf>.
125 Thompson, F, Tonby, O, Sneader, K & Woetzel, J 2015, No ordinary disruption: the forces reshaping Asia, McKinsey&Company,
<https://www.mckinsey.com/singapore/our-insights/no-ordinary-disruption-the-forces-reshaping-asia>.
126 Dobbs, R, Ramaswamy, S, Stephenson, E & Viguerie, SP 2014, Management intuition for the next 50 years, McKinsey&Company,
<http://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/management-intuition-for-the-next-50-
years>.

Figure 15 Costs (a) and time (b) for compliance with Australian import and export regulations
OECD = Organisation for Economic Co-operation and Development

Source: Organisation for Economic Co-operation and Development 2017, OECD economic surveys: Australia – March 2017, OECD, Paris,
<http://dx.doi.org/10.1787/eco_surveys-aus-2017-en>; The World Bank 2016, Doing business: Trading across borders, <http://www.
doingbusiness.org/data/exploretopics/trading-across-borders>.
Figure 16 Employment change of private sector largea businessb in Australia, 2012–16
ABS = Australian Bureau of Statistic; SME = small and medium enterprise

a ABS definition: large = 200+ employees, medium = 20–199 employees; small = 1–19 employees
b Excludes financial and insurance services, which are not reported in ABS data, including full-time and part-time
c New entries to the big business segment, including direct entry to big business and SMEs scaling up (over 50 per cent in terms of number
of companies)
d Based on McKinsey Global Institute research in the United States, the vast majority of new entries to big business are firms 0–5 years old
Source: Australian Bureau of Statistics, 2016, 8155.0 Australian industry by division, 8165.0 Counts of Australian business, including entries
and exits, June 2012 to June 2016, ABS, Canberra.

Figure 17 Contribution of firms to export growth, 2004–05 to 2010–11
Note: Averages incorporate all industry classes except Standard Institutional Sector Classification of Australia Sector 2 firms. Average
annualised growth rates are calculated on a total sales basis over a rolling three-year period.
Source: Australian Bureau of Statistics, 2016, Business longitudinal analysis data environment. Customised data report commissioned by
the Department of Industry, Innovation and Science, ABS, Canberra.
SMEs need increasingly sophisticated and Australian governments have multiple program
geographically granular strategies to take models they can build on to help high-growth
advantage of these export opportunities. SMEs to export, including participating in
Researching local nuances across markets is trade missions and accelerator landing pads,
difficult for young firms and SMEs with limited finance for capital goods exports, export market
resources. There may be economies of scale in development grants, and IGCs.
addressing common information gaps to help
Direct government support for participation in
such firms understand the nuances of different
trade missions correlates with increased export
markets or cities. Participants in the Bunbury
market participation. A review of the Export
consultation forum conducted as part of the ISA
Market Development Grants scheme found that
review shared:
the scheme helps to increase the number of
We’re a start-up and I am flat out trying to businesses that develop into exporters, and has
get to the bottom line. I don’t have the time a substantial proportion of high-growth firms
to reach out and create those networks for in the scheme.127 ISA’s preliminary analysis of
myself. It’s going to take us a long time performance by SME participants in the scheme
to get to the point where we can afford shows that 45 per cent increased their employee
to spend our time doing that rather than numbers by at least 73 per cent (equivalent to
spending our time trying to pay the rent. a threshold of 20 per cent growth compounded
Helping start-ups with export strategy is over three years) and 52 per cent increased their
one of the things that can be an enabler. turnover in excess of the same threshold.128
127 Australian Trade Commission 2015, Certainty and confidence — exports and jobs for a changing global economy: review of the Export
Market Development Grants scheme, Austrade, Canberra.
128 Analysis performed by Innovation and Science Australia.

Swinburne University research also found that of focus for the government. Digital capability
trade mission participation increased the chance can be a significant source of growth through
of a company becoming an exporter within improved productivity.130
12 months by 26 per cent. On average, missions
A key area of opportunity in the Australian
increased participating firms’ exports by at least
economy that is under-served is the rapidly
172 per cent within a year.129
emerging field of data science and AI. The
strategic opportunity for Australia is that
Recommendations cyber–physical systems (including technologies
broadly referred to as the ‘internet of things’) are
Recommendation 7: Increase efforts to help estimated to be a $15 trillion per year economic
young Australian businesses and small and enabler globally over the next 15 years.131 As has
medium enterprises to access export markets by: been seen in previous waves of transformation
• increasing funding for Export Market driven by ICT, the countries who scale their
Development Grants and investigating how to capability fastest in this area are likely to capture
target a larger proportion of the funds to high- the greatest opportunity.
growth businesses (e.g. consider fostering The nation’s research ecosystem is responding
and identifying them via Industry Growth to this important opportunity with R&D
Centres) collaborations, such as the Data to Decision
• extending funding for international capability Cooperative Research Centre, bringing
promotion through targeted trade missions together industry, universities and government
and trade promotion activities. researchers to tackle ‘big data’ challenges. The
national science agency, CSIRO, has also built up
impressive capabilities; its data science group,
Strategic opportunity 2.3: Data61, has the highest concentration of data
scientists in Australia and a proven track record
for industry engagement and translation of
The opportunities presented by
digital and data science-based research.
the ‘fourth wave’ of the internet
can be captured by strengthening However, there is a risk Australia will be unable
Australia’s digital economy to scale its capability rapidly enough to meet the
needs of a transforming economy. Specifically,
we must ensure we nurture the skilled workforce
and high fixed-cost research and knowledge
Rationale infrastructure required for Australia to be a
Adoption and use of digital technologies will be leader in the next wave of the internet revolution
a significant driver of economic growth. Digitally based on cyber–physical systems.
agile businesses tend to be more productive The Australian Government is developing a
and competitive than others. A key enabler for Digital Economy Strategy to maximise the
digital business will be improved availability of potential of digital technology to improve the
high-speed broadband, using both existing and nation’s productivity and competitiveness,
emerging technologies, which is a current area
129 Milic, J, Palangkaraya, A & Webster, E 2017, Entering global value chains: do trade missions work?, Working Paper Series, Centre for
Transformative Innovation, Swinburne University of Technology, Melbourne, <http://www.swinburne.edu.au/media/swinburneeduau/
research/research-centres/cti/working-papers/CTI-Working-Paper-1-17-Entering-Global-Production-Chains.pdf>.
130 Office of the Chief Economist 2016, Australian industry report, Australian Government Department of Industry, Innovation and
Science, Canberra, <https://industry.gov.au/industryreport>.
131 Evans, PC & Annunziata, M 2012, Industrial internet: pushing the boundaries of minds and machines, GE, <https://www.ge.com/
docs/chapters/Industrial_Internet.pdf>. Estimate is of cumulative benefit assuming a 0.75 percentage point in global productivity due
to industrial internet.

while minimising its negative effects.132 The competitors in some sectors following the
government’s priority should be to position Global Financial Crisis may have further reduced
Australia as a leading nation in the research, competition.134
development and exploitation of AI and machine
The emergence of global players in some of
learning (ML) across the digital economy.
these sectors, often with business models
underpinned by powerful platform economics,
Recommendations means that Australia finds itself an increasingly
attractive market for foreign entry. This has
Recommendation 8: The forthcoming Digital been most visible in the retail sector, where
Economy Strategy should prioritise the international players such as Zara and H&M
development of advanced capability in artificial have set up a physical presence, and Amazon
intelligence and machine learning in the is widely expected to launch a stronger online
medium- to long-term to ensure growth of the presence soon. Although the extra efficiency
cyber–physical economy. such competition brings may provide some
benefit to Australian consumers, the fact that
so much of the enabling infrastructure and
Strategic opportunity 2.4: capability is typically located overseas will limit
the value created for Australia.
To respond to this, it will be important that
Business productivity in all
Australian-grown firms improve their global
sectors can be facilitated by
competitiveness. This includes sectors
healthy levels of competition
that have traditionally not been exposed to
international competition, and especially
those sectors where platform economics make
Rationale global competitors difficult to counter. The past
30 years of prosperity in Australia was, to a
Renewing our commitment to competition significant extent, powered by an opening up
Competitive intensity appears to be in decline in of the Australian economy and a commitment
some developed economies. This has been most to national competition policy. This has shown
extensively studied in the United States,133 but strong competition is good for the economy and
there are emerging signs that some of Australia’s jobs, as it encourages innovation, productivity,
domestic industries, such as retail and utilities, jobs and income growth.135 It is therefore
are facing long-term competitiveness challenges. welcome that the Australian Government has
Historically shielded from domestic and global renewed its commitment to competition policy
competition due to Australia’s geography and through the recent Competition Policy Review.
small market size, and with growing input costs The review, led in 2015 by Professor Ian Harper,
and inconsistent labour productivity, these identified multiple areas where Australian
industries are less competitive than Australia’s governments could improve regulatory
export sectors. More recently, the exit of foreign competitiveness, such as water regulation.136
132 Australian Government Department of Industry, Innovation and Science 2017, The digital economy: opening up the conversation, DIIS,
Canberra, <https://industry.gov.au/innovation/Digital-Economy/Documents/Digital-Economy-Strategy-Consultation-Paper.pdf>.
133 Economic Innovation Group 2017, Dynamism in retreat: consequences for regions, markets, and workers, EIG, Washington, DC,
<http://eig.org/wp-content/uploads/2017/07/Dynamism-in-Retreat-A.pdf>.
134 Leigh, A & Triggs, A 2016, ‘Markets, monopolies and moguls: the relationship between inequality and competition’, Australian
Economic Review, vol. 49, no. 4, pp. 389–412.
135 Harper, I, Anderson, P, McCluskey, S & O’Bryan, M 2015, Competition Policy Review: final report, Australian Treasury, Canberra,
<http://competitionpolicyreview.gov.au/final-report>.
136 Harper, I, Anderson, P, McCluskey, S & O’Bryan, M 2015, Competition Policy Review: final report, Australian Treasury, Canberra,
<http://competitionpolicyreview.gov.au/final-report>.

Its recommendations provide a good starting situations may lock up economic value because
point to reduce domestic input costs and data sets are not exploited by companies that
ultimately improve productivity. The Australian own them. Other regulators, including those in
Government has responded to this review; the United Kingdom and Europe, are currently
however, there are outstanding recommended designing regimes to ensure the potential
initiatives that require state and territory economic value associated with these data sets
government actions. These deserve accelerated is not stranded.
consideration by state and territory governments
National Australia Bank and Macquarie Bank are
working with the Australian Government.
transforming banking with the implementation
The power of competition to drive innovation of application programming interfaces that will
makes this an important area for the 2030 make it possible for customers to share their
Plan, and one which will likely require ongoing data with third-party financial service providers.
attention. It is important that governments This open banking initiative is a good first step
ensure relevant agencies such as the Australian towards empowering the customer to exploit data.
Competition and Consumer Commission are
The Australian Government recognises data
resourced and empowered to maintain robust
access as an important issue. It commissioned
competition across the economy.
the Productivity Commission to conduct a review
of data availability and use, which was presented
Maintaining competition and innovation in a to the Australian Government in March 2017.138
data-rich world The review makes welcome recommendations
for comprehensive legislative reform to create a
Governments can also help to spur innovation by
system based on transparency and confidence in
addressing market or information failures. One
data processes, treating data as an asset and not
area of opportunity is facilitating access to data.
a threat. Although the Commission notes that
PwC estimated in 2013 that data-driven activity
‘business data use can, by the evidence we have
contributed $67 billion to GDP, but that Australia
seen, be generally left to market development’,139
could realise an additional $48 billion annually
ISA remains concerned about the potential for
from data-driven innovation.137
inhibition of competition and innovation through
Access to data is emerging as an important concentrated control of data. This should
barrier to market entry in the digital economy therefore be the subject of ongoing vigilance
because of the prevalence of powerful network from government.
effects. Network effects mean that a first-mover
company, which rapidly achieves scale and
scope in a product category, gains an ongoing Recommendations
market advantage among consumers who value
Recommendation 9: Establish protocols
extra users being added. When network effects
(including consumer data rights) for maintaining
are created by such companies, the monopoly or
healthy levels of competition in knowledge-
quasi-monopoly situation the company enjoys
intensive industry sectors.
in its own market can then create a secondary
monopoly on user data collection.
Because it is hard for new entrants without
equivalent scale to appeal to consumers, these
137 PricewaterhouseCoopers 2014, Deciding with data: How data-driven innovation is fuelling Australia’s economic growth, PwC,
<https://www.pwc.com.au/consulting/assets/publications/data-drive-innovation-sep14.pdf>.
138 Productivity Commission 2017, Data availability and use: Productivity Commission inquiry report, PC, Canberra,
<https://www.pc.gov.au/inquiries/completed/data-access/report>.
<https://www.pc.gov.au/inquiries/completed/data-access/report>, p. 168.

Strategic opportunity 2.5: of Australian workers into the future, and should
be seen as part of a portfolio of measures which
complement skilled immigration programs.
Australia’s innovation investment
Australia has also been active in seeking
and talent can be strengthened
to use immigration to boost innovation and
by improving access to global
entrepreneurial talent. Australia was the first
talent pools and fostering greater
country in the world to offer an entrepreneur
gender and ethnic diversity
visa, which allows migrants to undertake
entrepreneurial activity in Australia, provided
they can demonstrate sufficient financial
Rationale backing from investors for their venture.143
In 2015–16, 7620 visas offered were in the
Securing sufficient talent is vital for companies,
business innovation and investment stream;144
particularly high-growth, scaling firms. Australia
this represents 5.65 per cent of all visas awarded
has a strong track record in skilled immigration,
in the skilled stream of permanent entrants in
and has further opportunities to fine-tune
that year.145
schemes to attract top talent and fill skill
shortages. There are opportunities to continue to refine
immigration rules to improve access to specialist
Immigration is particularly important to make
skilled talent and attract entrepreneurs. The
up local shortages in areas of fast-moving,
pioneering nature of the entrepreneur visa
high-demand skills, such as ICT professionals.
means some ongoing fine-tuning will be needed.
In 2015–16, the net inflow of ICT workers to
Most business innovation and investment stream
Australia was 20,700 people, representing
visas relate to investment and general business
3 per cent of the overall ICT workforce.140 Start-
ownership, rather than entrepreneurship, and
up firms, especially in technology, frequently
therefore set minimum investment holding
need immigration to access talent. In its 2016
thresholds. This can be an exclusionary
annual report, Start Up Muster recorded that
requirement for entrepreneurs, especially those
16 per cent of start-up employees were on a
at earlier career stages. For example, in 2012–16,
visa, and just over 8 per cent were on temporary
the initial entrepreneur visa (subclass 132) had
work (skilled) visas.141 In the broader workforce
the demanding requirement of an investment
those on temporary work (skilled) visas comprise
threshold of $1 million; fewer than five visas
less than 1 per cent of the total workforce.142 The
were awarded during that time.146 A secondary
Australian Government’s Skilling Australia Fund
entrepreneur visa category (188) was added that
is a novel and potentially valuable approach to
has a lower investment threshold ($200,000)
supporting the vocational education and training
and a pathway to permanent residency. However,
140 Australian Computer Society 2016, Australia’s digital pulse: developing the digital workforce to drive growth in the future, Deloitte
Access Economics, <https://www2.deloitte.com/au/en/pages/economics/articles/australias-digital-pulse.html>.
141 Startup Muster 2016, Startup Muster 2016 annual report, Startup Muster,
<https://www.startupmuster.com/Startup-Muster-2016-Report.pdf>.
142 Australian Broadcasting Corporation 2016, ‘Fact check: why Michaelia Cash’s claims on 457 visas get mixed verdicts’, ABC News,
31 March, <http://www.abc.net.au/news/factcheck/2016-03-23/fact-check-457-workers/7232258>.
143 Australian Government Department of Immigration and Border Protection 2017, Business Innovation and Investment (Provisional) visa
(subclass 188), DIBP, Canberra, <http://www.border.gov.au/Trav/Visa-1/188->.
144 Australian Government Department of Immigration and Border Protection 2016, Report on Migration Programme 2015–16, DIBP,
Canberra,
<http://www.border.gov.au/about/reports-publications/research-statistics/statistics/live-in-australia/migration-programme>.
145 This figure does not include temporary work (skilled) visas (subclass 457); Australian Government Department of Immigration and
Border Protection 2016, Report on Migration Programme 2015–16, DIBP, Canberra,
<http://www.border.gov.au/about/reports-publications/research-statistics/statistics/live-in-australia/migration-programme>.
146 Statistics supplied by the Australian Government Department of Immigration and Border Protection.

uptake has remained at fewer than five per year Sustaining Australia’s attractiveness for
since its introduction in October 2016.147 direct foreign investment in innovation,
Further improvements could be made to the science and research
cost and speed of processing these visas. A A country such as Australia, with a relatively
number of countries have streamlined their small population and a high demand for capital,
processes to increase uptake: for example, the could look to direct foreign investment to make
Tech Nation Visa Scheme in the United Kingdom up any shortfall between domestic investment
takes a maximum of 16 weeks to process, and and savings and demand. There is ongoing
costs just under £300.148 The Australian start- global competition to attract direct, high-quality
up community has observed that the Australian foreign investment in national economies.
entrepreneur visa requires improvement to Economies that can create the right conditions
address processing times (which can be over for economic growth and allow innovation to
a year), application expense (which can be occur will remain an attractive proposition for
over $3000), and restrictions on eligibility foreign investors.
requirements relative to other countries. 149 It is
important that Australia is able to compete for Australian industry and businesses will benefit
entrepreneurial talent and skills with equivalent from foreign investment regardless of whether
countries where visa conditions and application the foreign entrants conduct their operations
processes are less onerous. in Australian-owned subsidiaries, because
of the potential for knowledge spillover. For
The Australian Government should continue example, foreign entrants can introduce new
to facilitate Australian business access to top knowledge by demonstrating new technologies
talent by iterating immigration rules to meet and training workers who later take employment
changing market needs. ISA has considered in local firms. They can also help to develop new
multiple methods by which this could be infrastructure and expertise and provide access
achieved in its submission to the Department to global supply chains. Greater competition
of Immigration and Border Protection’s recent can also force local firms to innovate through
public consultation, Transforming Australia’s improved productivity measures such as the
Visa System.150 Australia can also improve adoption of new management practices and
marketing of skilled visas to increase uptake, technologies.
through better website information on visa types
and increased promotion of undersubscribed
visa classes. 151 Fostering greater gender and
ethnic diversity
ISA’s performance review found that a
weakness of Australia’s Innovation Science and
Research system is that, despite substantial
improvements in recent decades, it remains
part of a gender-unequal society.152 There is a
147 Statistics supplied by the Australian Government Department of Immigration and Border Protection.
148 Tech Nation 2017, Tech Nation Visa Scheme, Tech Nation, London, <http://www.techcityuk.com/tech-nation-visa/>.
149 McCauley A 2017, ‘Address visa issue to attract the talent’, The Australian, 18 July, <http://www.theaustralian.com.au/business/
technology/address-visa-issue-to-attract-the-talent/news-story/f6e3b4d4a7921dd726c9dc96496a02a4>.
150 Australian Government Department of Immigration and Border Protection 2017, Visa simplification: transforming Australia’s visa
system, DIBP, Canberra.
151 Methods considered include changes to pathway to permanent residency; recognition of doctoral work experience; regular reviews
of skilled occupation lists; consideration of salary threshold as exemption to skilled occupation lists; raising permanent migration
program age limit to 50; review of current capping of skilled migration scheme; and harmonisation of visa age requirements.

growing body of literature showing that gender Australian Private Equity and Venture Capital
and ethnic diversity is important for innovation Association has recently launched a diversity
performance. handbook. These measures are welcome and
need to be sustained over time. Government
The causes of female under-representation in
should contribute to these developments by
early-stage and high-growth companies are
raising awareness of gender diversity in its own
complex and multi-factorial, and require action
programs that target the start-up community.
from all players in the system. However, in a
promising development a number of female-
focused incubators and accelerators such as Recommendations
Springboard Enterprises and SheStarts have
made good progress in building a stronger Recommendation 10: Build on strength in
cohort of female entrepreneurs. In addition, accessing overseas talent through continuing
industry bodies such as LaunchVic have and targeted updates to skilled immigration
also made gender diversity a priority as they rules and improved marketing to suitable talent,
seek to build their local ecosystems, and the especially through Austrade (with a focus on key
target markets).
case study 5 Innovation is providing exciting opportunities to

Australia’s female entrepreneurs and researchers
Australia has a fine tradition of quiet Dr Rathjen was named the BioSingapore
achievers, often better known on the Asia Pacific Biotechnology Woman
world stage than at home. Dr Deborah Entrepreneur of the Year in 2009, and
Rathjen is one such person. She is an 2014 Woman Executive of the Year at
entrepreneur, scientist, innovator, mother the BioPharm Industry Awards. In 2015,
and CEO of Bionomics – an Adelaide-based Dr Rathjen was included in the top 50 most
biopharmaceutical company that has gone influential Australian businesswomen by
global. The Australian newspaper.
Dr Rathjen is steering Bionomics through
a critical phase in building a portfolio of
drug candidates from early to advanced
stages of clinical development. Bionomics
is developing innovative therapeutics for
diseases of the central nervous system
(including Alzheimer’s disease) and cancer.
She is renowned for her business acumen
(including company financing, mergers and
acquisitions), and experience in therapeutic
product research and development,
business development, licensing and
commercialisation.

IMPERATIVE 3
Government: Become a catalyst for innovation
and be recognised as a global leader in innovative
service delivery
ISA’s vision is that by 2030, be achieved through collaboration between

Australian governments
Australian governments will facilitate
• Strategic opportunity 3.2: Investors can be
innovation through the regulatory and
encouraged to pursue opportunities that
policy environment; procurement and generate both financial and social returns
major programs and projects; and • Strategic opportunity 3.3: The use of open
through role modelling innovation in data would be accelerated by improving
service delivery. access and usefulness
• Strategic opportunity 3.4: National innovation
Both Australian and state and territory can be stimulated by using government
governments are critical to this imperative. procurement as a strategic lever
Governments collectively comprise
• Strategic opportunity 3.5: Government service
approximately 20–40 per cent of the Australian
delivery can be improved through process
economy, depending on the measure
redesign and digital technology.
used.153 There are about 1.9 million workers
in the public sector across the Australian, The Australian and state and territory
state and territory governments, making up governments can use their position as some of
16.2 per cent of the nation’s workforce (with Australia’s ‘largest firms’ to foster innovation
the Australian Government public service being in the private sector and continuously improve
243,000 workers).154 citizen experience through new service delivery
models.
To catalyse innovation, the public sector needs
Strategic opportunities for to change. As part of the global economy,
government the private sector has experienced massive
disruption of business models, service channels
Governments have five opportunities to use and workforce needs. The public sector has not
their strategic market power and position to seen that same disruption. The structure of the
accelerate jobs, growth and innovation by 2030: Australian Government public service reflects
• Strategic opportunity 3.1: A flexible regulatory the needs of government in the 1980s, not the
environment that supports innovation could 2000s. Efforts have been made to examine
capability and operating models. However,
153 Australia’s general government spending accounted for 36% of GDP in 2014; Organisation for Economic Co-operation and
Development 2017, General government spending, OECD, Paris, <https://data.oecd.org/gga/general-government-spending.htm>.
Australia’s general government final consumption expenditure accounted for 18% of GDP in 2016; World Bank 2017, General
government final consumption expenditure (% of GDP), World Bank, Washington, DC,
<https://data.worldbank.org/indicator/NE.CON.GOVT.ZS>.
154 Australian Bureau of Statistics 2016, Employment and earnings, public sector, Australia, 2015–16, cat. no. 6248.0.55.002, ABS,
Canberra, <http://www.abs.gov.au/ausstats/abs@.nsf/mf/6248.0.55.002>.

without further change, the public sector will emerging approach that enables regulatory
not be well placed to deliver the opportunities frameworks to be adapted to innovation. It
outlined in this report or meet the needs of encompasses multiple concepts, including
Australian businesses and consumers in the open dialogue with innovators and incumbents,
21st century. iterative rules, and regulatory testbeds and
sandboxes.158 A number of these methods are
already being tested in Australia. The Australian
Strategic opportunity 3.1 Securities & Investments Commission has
created an innovation hub designed to help
financial technology (or ‘fintech’) start-ups to
A flexible regulatory environment
navigate Australia’s regulatory system. As part of
that supports innovation could be
this initiative, a regulatory sandbox was created,
achieved through collaboration
which includes a world-first class waiver to
between Australian governments
allow eligible fintech businesses to test certain
specified services for up to 12 months without an
Australian financial services or credit licence.159
Rationale In the health domain, Australian regulators
There is significant work under way to improve are reforming processes to strike a balance
Australia’s legal and regulatory framework between maintaining high safety and quality
to enhance innovative activity. This includes standards for consumers and facilitating health
the Productivity Commission’s recent review and medical innovation. The Therapeutic Goods
of Australia’s IP laws,155 and the passage of Administration (TGA) is decreasing approval
legislation implementing the NISA measures to times for new medicines and devices and
amend insolvency laws.156 However, innovation increasing flexibility for industry by enabling
and technical change often have significant several new pathways for registration. The
impacts on regulation, by challenging or TGA has commenced rolling out regulatory
circumventing orthodox approaches and laws. reforms, including increasing the emphasis
As the Commission notes, ‘getting the most on international regulatory convergence
from technological change requires an adaptive and providing more flexibility for approval
regulatory approach. New business models for medicines and medical devices while
using digital technologies may not fit neatly strengthening post-market monitoring of all
within existing regulatory regimes and some therapeutic goods. This risk-based framework
operate in regulatory grey areas.’157 provides opportunities for researchers
and manufacturers to bring products to
The National Endowment for Science,
the Australian market faster and with less
Technology and the Arts in the United Kingdom
regulatory burden.160 Similar reforms have been
has identified ‘anticipatory regulation’ as an
implemented in the Australian Government’s
155 Productivity Commission 2016, Intellectual property arrangements, Productivity Commission inquiry report, PC, Canberra,
<https://www.pc.gov.au/inquiries/completed/intellectual-property/report>.
156 Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Bill 2017,
<http://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r5886>.
157 Productivity Commission 2016, Digital disruption: what do governments need to do?, Productivity Commission research paper, PC,
Canberra, <https://www.pc.gov.au/research/completed/digital-disruption/digital-disruption-research-paper.pdf>.
158 Nesta 2017, Anticipatory regulation: 10 ways governments can better keep up with fast-changing industries, Nesta, London,
<http://www.nesta.org.uk/blog/anticipatory-regulation-how-can-regulators-keep-fast-changing-industries>.
159 Australian Securities and Investment Commission 2017, Regulatory sandbox, ASIC, Canberra,
<http://asic.gov.au/for-business/your-business/innovation-hub/regulatory-sandbox>.
160 Therapeutic Goods Administration 2016, Australian Government response to the Review of Medicines and Medical Devices Regulation,
TGA, Australian Government Department of Health, Canberra,
<https://www.tga.gov.au/australian-government-response-review-medicines-and-medical-devices-regulation>.

Health Technology Assessment framework. The COAG is pressing to create a more flexible
framework provides an integrated and consistent regulatory environment within Australia to foster
approach across Australian Government innovation.164 ISA supports the COAG Industry
processes to inform which health technologies and Skills Council aim to adopt an ‘anticipatory
should be subsidised. The integrated process regulation’ principles-based approach that
seeks to facilitate medical innovation without guides nationally consistent approaches to
compromising timely and affordable patient regulating technical innovation and disruptive
access to clinically appropriate and cost-effective business models.
medical services and devices.161
Australian governments are working together on Recommendations
a streamlined and consistent national approach
to clinical trials with the intention of enhancing Recommendation 11: The Australian Government
health outcomes and building Australia’s ability should work with states and territories to lead
to attract national and international clinical efforts to create a more flexible regulatory
trials. Under COAG, health ministers have agreed environment within Australia to foster
to develop approaches to organise sites to better innovation, including exploring specific areas
support and streamline clinical trials processes for cross-jurisdictional collaborative regulatory
and better engage sponsors and improve trial reform.
start-up times and outcomes in Australia.162 Endorsement C: Innovation and Science Australia
State and territory governments are also taking endorses the Council of Australian Governments’
an innovative approach towards anticipatory Industry and Skills Council’s aim to adopt an
regulation. The NSW Government is trialling ‘anticipatory regulation’ principles-based
the Regulatory Sandbox program to provide a approach that guides nationally consistent
regulatory exemption for innovative solutions approaches to regulating technical innovation
that offer clear benefits to the citizens of NSW. and disruptive business models – these
The first regulatory sandbox is expected to be principles should be adopted and implemented
announced in mid-2017.163 nationally as a matter of priority, incorporating
consultation with Industry Growth Centres in the
There are also significant opportunities for
process.
multiple jurisdictions to collaborate to improve
regulatory experiences for businesses. For
example, Australian, NSW and local governments
collaborated to create a single web interface Strategic opportunity 3.2:
for all business approvals required for starting
a café in Parramatta; it is anticipated that Investors can be encouraged to
more business types and jurisdictions will pursue opportunities that generate
be gradually added. Australian governments both financial and social returns
should also explore specific areas for cross-
jurisdictional collaborative regulatory reform.
The Australian Government can ensure that
the innovation system delivers social as well
161 Australian Government Department of Health 2011, Health HTA policy framework, DoH, Canberra,
<http://health.gov.au/internet/hta/publishing.nsf/Content/policy-1>.
162 Australian Government Department of Health, Clinical trials, DoH, Canberra
<http://www.health.gov.au/internet/main/publishing.nsf/Content/Clinical-Trials>.
163 New South Wales Government 2017, Regulatory sandboxes, New South Wales Government, Sydney,
<https://sandboxes.innovation.nsw.gov.au>.
164 Council of Australian Governments Industry and Skills Council 2017, Communiqué for the COAG Industry and Skills Council meeting,
4 August 2017, COAG Industry and Skills Council, Canberra, <https://industry.gov.au/AboutUs/Documents/COAG-Industry-and-Skills-
Council/4%20August%202017%20-%20COAG%20Industry%20and%20Skills%20Communique.pdf>.

as financial returns by addressing specific
information failures in the emerging social Figure 18 Barriers to impact investing
impact investment (SII) market.
Rationale
Global innovation strategies are increasingly
helping national innovation systems to deliver
social and environmental benefits alongside
economic benefits.165 On the whole, Australia
performs well compared with other nations
in terms of its social outcomes. Australian
organisations have been at the forefront of
social innovation, with organisations such as
the Australian Centre for Social Innovation and
Social Ventures Australia introducing a number
Source: Impact Investing Australia 2016, 2016 investor report,
of new approaches in the social sphere.
IIA, <https://impactinvestingaustralia.com/wp-content/uploads/
Impact-Investing-Australia-2016-Investor-Report.pdf>.
Multiple reviews have identified rapidly
increasing demand for SII in Australia from
corporate and mixed-profit enterprises.166 social service delivery.169 The Financial Services
Returns on SIIs in Australia generally meet Inquiry identified specific impediments to SII,
expectations, but a lack of reliable research, including the absence of guidance on impact
information, benchmarks and recognised investment for superannuation fund trustees
investment framework, are deterrents to and a need to reform laws to re-classify select
investors (Figure 18).167 Asset managers are private ancillary funds.170 During 2017, the
also looking for guidance in assessing impact Australian Government responded by producing
investment opportunities.168 SII investment principles that guide government
involvement in this market.171 In addition, the
Two major reports to government recommended
Australian Government committed $30.4 million
options to improve the impact investment
in the 2017–18 Budget to trial the use of SII,
market and encourage innovation in funding
including $10.2 million to tackle homelessness
165 High Level Group on Maximising the Impact of EU Research & Innovation Programmes 2017, LAB–FAB–APP: investing in the European
future we want, European Commission, Luxembourg,
<https://ec.europa.eu/research/evaluations/pdf/archive/other_reports_studies_and_documents/hlg_2017_report.pdf>.
166 Impact Investing Australia 2016, 2016 investor report, IIA
<https://impactinvestingaustralia.com/wp-content/uploads/Impact-Investing-Australia-2016-Investor-Report.pdf>.
167 Impact Investing Australia 2016, 2016 investor report, IIA
<https://impactinvestingaustralia.com/wp-content/uploads/Impact-Investing-Australia-2016-Investor-Report.pdf>
168 Impact Investing Australia 2016, Benchmarking impact: Australian impact investment activity and performance report 2016, IIA,
<https://impactinvestingaustralia.com/wp-content/uploads/Benchmarking-Impact.pdf>.
169 Australian Treasury 2014, Financial System Enquiry: final report, Australian Treasury, Canberra, <http://fsi.gov.au/files/2014/12/
FSI_Final_Report_Consolidated20141210.pdf>; Australian Government Department of Social Services 2014, A new system for better
employment and social outcomes: full version of the interim report, DSS, Canberra, <https://www.dss.gov.au/our-responsibilities/
review-of-australia-s-welfare-system/a-new-system-for-better-employment-and-social-outcomes-full-version-of-the-interim-report>.
170 Australian Treasury 2014, Financial System Enquiry: final report, Australian Treasury, Canberra,
<http://fsi.gov.au/files/2014/12/FSI_Final_Report_Consolidated20141210.pdf>.
171 Australian Treasury 2017, Australian government principles for social impact investing, Australian Treasury, Canberra,
<https://treasury.gov.au/programs-initiatives-consumers-community/social-impact-investing/australian-government-principles-for-
social-impact-investing>.

in partnership with states and territories.172 marry precise geographical position (latitude
The Australian Government should continue to and longitude) with street addresses, allowing
improve conditions for social impact investing businesses to develop useful software products
to allow investors to pursue opportunities that for customers (including emergency service
generate both financial and social returns. providers and delivery companies). Use of
these datasets has increased significantly after
being made publicly available, with 73 per cent
Recommendations of users achieving efficiencies or productivity
Recommendation 12: Further strengthen the growth through the dataset, and 41 per cent
policy environment to encourage investors to of users reporting development of goods and
pursue opportunities that provide both social services through use of the data (Figure 20).
and financial returns. However, there is still significant opportunity
to facilitate value creation through open data,
with PwC estimating in 2013 that Australia could
Strategic opportunity 3.3: realise approximately $16 billion of additional
economic value through open data.176
The use of open data would As mentioned in Imperative 2, the Australian
be accelerated by improving Government has recognised the importance of
access and usefulness data to economic activity and commissioned the
Productivity Commission to undertake a data
availability and use review, which was presented
to the Australian Government in March 2017. 177
Rationale This review includes a recommendation that a
Open public data are an asset that can be new statutory role of national data custodian be
used to create financial value for companies created to guide and monitor new access and use
and better service and economic outcomes for arrangements, including proactively managing
governments. Australia is above average for risks and broader ethical considerations
the release and use of open data, ranking ninth around data use including providing guidance
in the world in the OECD’s OUR (‘open, useful, on privacy, de-identification and security. This
reusable’) government data index (Figure 19). recommendation recognised the need to balance
To date, over 28,000 Australian Government the need to instil trust and acceptance of data
datasets have been made open and accessible,173 systems within the community with the need to
with thousands more released by states and empower citizens, governments, industries and
territories.174 researchers to use and share data to help boost
innovation.
Australia is one of only a few countries in the
world to make its Geocoded National Address From the specific perspective of innovators,
File (G-NAF) open and publicly available.175 there are two practical issues that governments
G-NAF and Administrative Boundaries datasets face in making open data more useful for
172 Australian Government 2017, Reducing pressure on housing affordability: fact sheet 1.9 – encouraging social impact investing,
Australian Government, Canberra, <http://www.budget.gov.au/2017-18/content/glossies/factsheets/html/HA_19.htm>.
173 Australian Government 2017, Data.gov.au, Australian Government, Canberra, <https://data.gov.au>.
174 See, for example: Victorian Government 2017, Data.vic.gov.au, Victorian Government, Melbourne, <https://www.data.vic.gov.au>; New
South Wales Government 2017, Data NSW, New South Wales Government, Sydney, <https://data.nsw.gov.au>.
175 Australian Government Department of Industry, Innovation and Science 2017, The digital economy: opening up the conversation, DIIS,
Canberra, <https://industry.gov.au/innovation/Digital-Economy/Documents/Digital-Economy-Strategy-Consultation-Paper.pdf>.
176 PricewaterhouseCoopers 2014, Deciding with data: How data-driven innovation is fuelling Australia’s economic growth, PwC,
<https://www.pwc.com.au/consulting/assets/publications/data-drive-innovation-sep14.pdf>.
<https://www.pc.gov.au/inquiries/completed/data-access/report>.

Figure 19 Open, useful reusable government data by country, 2017

Source: Organisation for Economic Co-operation and Development 2017, Government at a glance 2017 database, OECD, Paris,
<http://www.oecd.org/gov/government-at-a-glance-2017-database.htm>.
Figure 20 Use (a) and impact (b) of selected Australian government datasets
G-NAF = Geocoded National Address File

Source: Australian Government Department of Prime Minister and Cabinet 2017, Geocoded national address data, PM&C, Canberra,
<https://www.pmc.gov.au/public-data/geocoded-national-address-data>.

industry. Firstly, it is costly to update, and can Recommendations
be technically challenging to maintain in a form
that is most useful for users outside government. Recommendation 13: Improve provision and use
Secondly, there is a persistent question of open government data by:
regarding the usefulness of the data that is • developing government capability and capacity
released. The Open Data Barometer, produced to deliver accessible, accurate and detailed
by the World Wide Web Foundation, notes that public data, balancing release of data with
Australia ranks poorly on machine-readability privacy and intellectual property concerns;
and reusability of data in important domains, this will entail sustained investment in data
such as health and education sector performance custodianship, maintenance and release
and government spending. Moreover, it notes • developing improved mechanisms
that governments are generally not publishing to encourage feedback to originating
data that people ‘really want and need’.178 More departments from industry and not-for-profit
substantial industry and not-for-profit feedback user groups to ensure that data released by
to originating departments for key datasets governments is maximally useful.
would help to improve the usefulness and
usability of government data for industry and
research purposes. Strategic opportunity 3.4:
Creating incubator initiatives focused
on government data is one strategy that National innovation can be
governments are using to increase dialogue stimulated by using government
between government and industry to stimulate procurement as a strategic lever
better use of open data. SPUR in Western
Australia is a sector-specific example; it is a hub
powered by Landgate, which helps companies Australian governments’ economic activity
and researchers to use location-based generates approximately one-third of the
information and other government data to solve nation’s GDP. There are opportunities to
real-world challenges.179 Similarly, ADAX, the strategically use this expenditure to promote
Malaysia-based ASEAN Data Analytics eXchange, innovation through procurement, and to trigger
created by the Malaysia Digital Economy more economic spillover benefits from existing
Corporation, is both an incubator and training major projects through strategic policy and
hub, providing information to organisations on project design choices.
how to harness the power of big data analytics.
Public-private partnerships can also be used
to harness the power of open data, such as Rationale
GovHack, an annual volunteer-run competition,
where participants use government data to Government spending on procurement is a
develop novel applications and solutions.180 significant market in Australia – for example,
Australian Government procurement alone
has grown from approximately $26 billion
in 2007–08, to nearly $57 billion in 2015–16
(Figure 21).
178 Open Data Barometer 2016, Country detail: Australia, Open Data Barometer,
<http://opendatabarometer.org/4thedition/detail-country/?_year=2016&indicator=ODB&detail=AUS>;
Open Data Barometer 2016, Global report: findings and recommendations, Open Data Barometer,
<http://opendatabarometer.org/4thedition/report/#findings_recommendations>.
179 SPUR 2017, About SPUR, SPUR, Midland, <http://www.spur.wa.gov.au/about-SPUR>.
180 GovHack 2017, About GovHack, GovHack, <https://govhack.org/about-us>.

Figure 21 Australian Government procurement contract expenditure, 2008–16
Note: The values reflect the aggregate of all contract values reported in AusTender in each financial year ending year indicated.
Source: Australian Government Department of Finance 2016, Statistics on Australian Government procurement contracts, Department of
Finance, Canberra, <http://www.finance.gov.au/procurement/statistics-on-commonwealth-purchasing-contracts>.
Using government procurement to Research (SBIR) allocations in the United

stimulate innovation States have led to the creation of new firms,182
significantly faster growth and employment, and
Other jurisdictions use procurement to foster
a higher likelihood of attracting venture capital
innovation and economic benefits. The United
funding.183 The SBIR has supported the early
Kingdom and United States governments both
stages of businesses that have subsequently
run small business research or innovation
become global success stories, such as security
initiatives as part of their procurement
firm Symantec and telecommunications
strategies. Through these programs, a
equipment and semiconductor maker
government department identifies a specific
Qualcomm.184 United Kingdom firms that
challenge or problem that is released to the
participate in the Small Business Research
public. Small businesses can then submit an
Initiative have nearly 10 per cent higher job
application with their proposed solution, and
creation than average, and more than 30 per cent
over the course of multiple phases, the company
average annual sales growth.185
has the opportunity to prototype and possibly
scale their solution.181 Small Business Innovation
181 See, for example: Small Business Research Initiative 2017, Process, SBRI, <https://sbri.innovateuk.org/process>.
182 National Research Council (US) Committee for Capitalizing on Science, Technology, and Innovation 2008, An assessment of the Small
Business Innovation Research Program, National Academies Press, Washington, DC.
183 Lerner, J 1999, ‘The government as venture capitalist: the long-run impact of the SBIR Program’, Journal of Private Equity, vol. 3, no. 2,
pp. 55–78.
184 Australian Government 2017, Business Research and Innovation Initiative: proof of concept, Australian Government, Canberra,
<https://www.business.gov.au/assistance/business-research-and-innovation-initiative>.
185 United Kingdom Government 2017, SBRI: helping government, helping business, UK Government, London, <https://www.gov.
uk/government/uploads/system/uploads/attachment_data/file/642084/SBRI_helping_government_helping_business_2017_
infographic_04092017.pdf>.

Supporting young, fast-growing firms through 2015–16.188 Although there are certain areas
procurement is strategic because these firms within government where procurement practices
are outsized contributors to innovation, jobs are constrained by international treaties and
and growth. As participants in the Melbourne agreements (e.g. in aid-related spending),
roundtable conducted as part of the ISA review there remain significant opportunities for
noted: improvement.
We need to get to a point where government Start-ups cite multiple administrative barriers
agencies in particular are not looking at to engaging with government (Figure 22)
programs any more as just handing out money including the need to present a financial history
but actually taking an investor view, investor to obtain government contracts. United States
output in a structured and a framed way. research echoes results of ISA consultations
Australian governments have started trialling in Australia that start-ups avoid engaging with
new approaches. In August 2016, the Australian government due to complexity and time involved
Government established the Business Research in process.189 Other countries have recognised
and Innovation Initiative, based on the SBIR,186 the opportunities presented by contracting with
and in March 2017 Defence announced the Small start-ups, and are in the process of improving
Business Innovation Research for Defence. their procurement systems to support start-
More recently, in August 2017, the government ups in their engagement with government. For
announced a new ICT procurement framework example, the United States Small Business
aimed at benefiting SMEs. Administration launched RFP (request for
proposal)-EZ in January 2013 to make it easier
Similar initiatives are also being, or have been,
for start-ups to discover and compete for
implemented at state and territory level by the
opportunities and for contracting officers to
Australian Capital Territory, Victorian and NSW
create statements of work.190
governments. However, Australian governments
could do more in this space. They are generally
less intent on using their procurement power Using major government projects that are
to foster innovation than other countries; the already in progress to identify, measure
Australian Government ranks just 70th out of 140 and capture spillover effects
countries on how well its procurement fosters
Australian governments are engaged in major
innovation.187 In addition, SME participation in
projects that will have a transformative impact
government tenders, when measured in respect
on the nation’s industry and service delivery
to contract values, is steadily decreasing,
landscape. These include the National Disability
from 39 per cent in 2011–12 to 24 per cent in
Insurance Scheme;191 new surface ship and
188 Australian Government Department of Finance internal data.
189 A Tenderer’s Declaration and financial statements for the previous three years should be a minimum requirement for high-risk
projects. In assessing profitability of a tenderer, the tenderer should have a track record of profitable operations, as measured by
profits generated in at least two out of the three most recent financial years; Australian Government Department of Finance 2014,
Assessing financial viability, Department of Finance, Canberra, <https://www.finance.gov.au/procurement/procurement-policy-and-
guidance/buying/contract-issues/assessing-financial-viability/practice.html>.
190 PricewaterhouseCoopers 2014, The startup economy: how to support tech startups and accelerate Australian innovation, PwC,
<https://www.digitalpulse.pwc.com.au/wp-content/uploads/2013/04/PwC-Google-The-startup-economy-2013.pdf>.
191 When the NDIS reaches full scheme in 2019–20, it is estimated that it will cost approximately $21.0 billion, or around 1.1 per cent of
GDP. The Australian Government’s contribution will be approximately $10.8 billion; Australian Government 2017, Budget 2017–18,
Budget strategy and outlook, Budget Paper no. 1, 2017–18, Australian Government, Canberra,
<http://budget.gov.au/2017-18/content/bp1/download/bp1.pdf>.

Figure 22 Barriers to contracting with government reported by start-upsa
a Fifty-six start-ups answered the survey question ‘What are the top barriers to contracting with the government?’
b Prime contractors often employ on government contracts.
Source: Boston Consulting Group and Eastern Foundry 2017, Why startups don’t bid on government contracts <https://www.bcg.com/en-au/
publications/2017/public-sector-agency-transformation-why-startups-dont-bid-government-contracts.aspx>.
submarine capabilities in Defence;192 and Economic growth and job creation are traditional
infrastructure projects at the federal and state spillover effects of major projects through
and territory levels, including the National multipliers. These are extra economic and jobs
Broadband Network, and the development of the activity triggered by the activity that multiply
Fishermans Bend project in Victoria.193 the benefit of each original dollar spent by
government. Innovation and skills spillovers
Spending on major programs that governments
are also important, as they build increased
have already decided to pursue can bolster
capability in the supply chain serving the
industry capability, productivity and
project, and the employees working on the
competitiveness. Health care and defence are
project, including by exposing them to new
often singled out as sectors where government
technologies and practices. However, it is
can effectively use its leverage, because these
difficult to forecast spillover benefits from
markets have government as the principal
major programs, or even calculate the spillover
customer and regulator.
benefits from past or current programs, because
of a lack of suitable data.
192 Naval Shipbuilding program budgeted at $89 billion; Australian Government Department of Defence 2017, Budget 2017–18: defence
budget overview, Department of Defence, Canberra,
<https://www.minister.defence.gov.au/minister/christopher-pyne/media-releases/budget-2017-18-defence-budget-overview>.
193 Total of $73.8 billion committed for Australian Government and state infrastructure projects, including the National Broadband
Network; ANZ Research 2017, Australia: major project update, ANZ Research,
<https://anzlive.secure.force.com/servlet/servlet.FileDownload?file=00P1400000nZLrqEAG>.

case study 6 Thales Australia: partners with defence science and
technology
During the 1970s and 1980s, the research DSTG and Thales employ scientists,
arm of the Australian Government engineers, and technicians all across
Department of Defence – known as the Australia, with 2100 employees in DSTG
Defence Science and Technology Group and over 3200 in Thales. The insights
(DSTG) – pioneered work on sonar sensors from this work are also being shared with
used to help detect activity at sea. DSTG the broader Australian manufacturing
recognised they would need a partner to industry through Thales’ participation in the
further develop and commercialise their Advanced Manufacturing Growth Centre,
work for it to be deployed in the field, and where they link other Australian advanced
chose a multinational supplier with an manufacturers into global supply chains.
Australian research and manufacturing arm, In 2015, Thales signed a global supply
Thales Australia, who combined the ability to chain agreement with Defence to assist
leverage global supply chains and markets competitive Australian SMEs to grow and
with strong local research capability. The enter export markets. This has resulted in
Thales sonars, powered by DSTG R&D, 80 contract wins within the first 12 months
continue to provide the Australian Defence of operation, and is a great example of how
Force with regionally superior undersea large multinational companies are working
warfare capability for the nation’s surface with government researchers and policy
ships and submarines. makers to connect competitive Australian
SMEs to export markets.
Subsequent non-military spin-offs have
provided sophisticated products for
the civilian seismic industry, resulting
in $350 million in export revenues for
Australia in recent years, and creating new
opportunities for local companies in the
supply chain. This enduring R&D partnership
has underpinned the recent breakthroughs
that have resulted in a fibre laser sensor
array, a compact and robust sonar that uses
micro-lasers to detect activity at sea and can
be easily towed behind navy vessels.
Projects involving advanced research and Gripen aircraft building project, for example, had
development and technology transfers are an economic multiplier of 3.6 and generated five
used by governments overseas to create new new firms and 1200 jobs by 1987 and 3000 jobs
capabilities to expand into new or broader at steady-state, mainly through high-technology
markets beyond the original project. Sweden’s and R&D activities.194
194 Keating, EG, Danescu, I, Jenkins, D, Black, J, Murphy, R, Peetz, D & Bana, SH 2015, The economic consequences of investing in
shipbuilding, RAND Corporation, Santa Monica, <https://www.rand.org/pubs/research_reports/RR1036.readonline.html>.

Although Australian governments have used Defence explicitly supports export activity, with
major projects to achieve broader economic export potential constituting part of the defence
benefits, the full potential has not always equipment procurement decision process.201
been realised. The Collins Class Submarines
Australia’s long-held Defence policy (since
project, for example, produced some innovation
the 1992 Price Review on Defence Policy
benefits. A novel steel technology developed
and Industry) is that it is more impactful for
with a number of partners, including BHP and
Australian industry to be encouraged and
Bisalloy steels,195 was leveraged in new Defence
incentivised to enhance their productivity, skills
commercial applications196 and export market
and innovation to win domestic and export
products.197 However, a review of the economic
business, than to rely primarily on preferential
impact of submarine building in Australia
treatment in procurement processes to support
commissioned by the Australian Government
local businesses.
Department of Defence reached the conclusion
that spillover effects from the Collins Submarines Defence is investing $200 billion over the
were ‘largely unrealised’.198 next 10 years in defence capability, and
implementation of the 2016 Defence White
The reasons that Australian projects are not
Paper.202 Defence is actively engaged in
triggering the same level of benefits seen in
strengthening local defence industry innovation
countries such as the United Kingdom include
capability. This includes establishing a 10-year
contractual arrangements that result in higher-
$1.6 billion defence industry and innovation
value activities going offshore, and investment
program aimed at boosting Defence’s
in projects that are unlikely to generate niche
operational capability and defence industry
advanced manufacturing industry. The Defence
capability.203 This includes establishing
industry policy in the United Kingdom does
the Centre for Defence Industry Capability
not mandate a fixed offset from major projects,
(CDIC), the Defence Innovation Hub for the
instead opting to focus on strengthening their
development of capabilities, and the Next
industry competitiveness. For example, the
Generation Technologies Fund for the research of
United Kingdom has committed to increasing the
capabilities.
proportion of defence procurements benefiting
British SMEs to one-third by 2020,199 as well as Defence and the CDIC are currently developing
increasing science and research activity through the defence industrial capability plan, including
the establishment of a 10-year, £800 million the sovereign industrial capability assessment
innovation-procurement fund.200 The Ministry of framework, and the defence exports strategy.
195 Australian Government Department of Defence 2017, Collins Class replacement technologies, Department of Defence, Canberra,
<https://www.dst.defence.gov.au/innovation/collins-class-replacement>.
196 Bisalloy 2017, Bisalloy Armour, Bisalloy, Unanderra, <https://www.bisalloy.com.au/products/bisalloyarmoursteel.aspx>.
197 Defence Connect 2017, Aus armour steel selected by LAND 400 contender, Defence Connect, North Sydney,
<https://www.defenceconnect.com.au/land-amphibious/1124-aus-armour-steel-selected-by-land-400-contender>.
198 Australian Government Department of Defence 2015, Building submarines in Australia: aspects of economic impact, Department of
Defence, Canberra, <http://www.defence.gov.au/FOI/Docs/Disclosures/145_1516_Documents2.pdf>.
199 United Kingdom Ministry of Defence 2016, MOD SME policy: refreshed post strategic defence and security review, MOD, London,
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/507298/20160311_Refreshed_SME_Policy_-_
Final_-_O.pdf>.
200 United Kingdom Ministry of Defence 2016, Procurement at MOD, MOD, London,
<https://www.gov.uk/government/organisations/ministry-of-defence/about/procurement>.
201 United Kingdom Government 2017, National Security Strategy and Strategic Defence and Security Review 2015: a secure and
prosperous United Kingdom, United Kingdom Government, London, <https://www.gov.uk/government/uploads/system/uploads/
attachment_data/file/555607/2015_Strategic_Defence_and_Security_Review.pdf>.
202 Australian Government Department of Defence 2016, 2016 Defence white paper, Department of Defence, Canberra,
<http://www.defence.gov.au/WhitePaper/Docs/2016-Defence-White-Paper.pdf>.
203 Australian Government Department of Defence 2016, 2016 defence industry policy statement, Department of Defence, Canberra,
<http://www.defence.gov.au/WhitePaper/Docs/2016-Defence-Industry-Policy-Statement.pdf>.

These documents will provide the final pieces of • developing contractual frameworks to
an integrated blueprint that will identify areas facilitate procurement from start-ups and
of sovereign industrial capability and areas for young firms
export potential.204 Most notably, the Defence • creating a ‘government as first customer’
Science and Technology Group is pioneering program designed for high-growth firms,
innovative partnership, collaboration and including start-ups, to be trialled by two of the
research translation mechanisms, with an explicit major procurement departments before a roll-
spillover benefit of raising knowledge intensity out across all government departments.
across the innovation supply chain of Defence.
Recommendation 16: Maximise the benefit from
Defence is also working with the Australian nationally significant government programs by
Government Department of Industry, Innovation establishing a framework to identify, predict,
and Science to collect and report on the industry encourage and evaluate spillover benefits by:
and innovation spillover benefits of some of
• using major Defence programs (such as
its major capability programs. These future
submarine, continuous ship-building and land
longitudinal data sets have the potential to
combat vehicles programs) as ‘pathfinders’
inform future spillover forecasting.
to establish how government can best define,
deliver and measure broad national value; the
Recommendations ‘pathfinder’ should plan, collect and report
on the data and insights that will help future
Recommendation 14: Establish a small and governments and policy makers to calculate
medium enterprise (SME) procurement target and forecast industry and innovation spillover
of 33 per cent of contracts (by dollar value) benefits
being awarded to Australian SMEs by 2022. The • exploring and reporting on how other major
Australian Government Department of Industry, projects and programs (information and
Innovation and Science should report on communications technology, infrastructure)
progress towards this target annually. can be leveraged to deliver increased
Recommendation 15: Increase the use of innovation and spillover returns and reskill
innovative procurement strategies to improve the workforce; the Defence Science and
outcomes and optimise government operations by: Technology Group’s engagement with
• establishing programs that promote, track innovative companies, including the provision
and report on progress towards procurement of investments for design and prototyping via
practices that drive innovation (including the Next Generation Technology Fund and the
identifying impediments raised by industry, Defence Innovation Hub, provides a potential
and measuring participation of firms by age exemplar.
and stage) across all levels of government
• continuing and potentially expanding the
challenge-based Business Research and
Innovation Initiative and Small Business
Innovation Research for Defence program, Government service delivery can
and managing their evolution to become be improved through process
Australian Small Business Innovation redesign and digital technology
Research equivalents of the successful United
States program
204 Australian Government Department of Defence 2017, Australian industry capability, Department of Defence, Canberra,
<http://www.defence.gov.au/SPI/Industry/AIC.asp>.

Rationale savings in one year alone through prevention
of error and fraud using advanced analytics.209
Digital innovation is an existing strength for There is significant opportunity to leverage
Australian governments; Australia ranks second analytics for compliance more widely in the
in the world in United Nations’ E-Government Australian Government and state and territory
online index and e-participation index.205 It is public sectors.
essential, however, for governments to continue
to find new ways to deliver better services more Although Australian governments are rolling out
cost-effectively, and to improve citizen and a range of digital services, Australian citizens
business experience. Service digitalisation is believe all tiers of government could do better
vital to meet the demands of Australians, who (Figure 24).
expect more and better digital services from Australians are also ambitious about the
government, delivered to the same standard service experience they believe governments
as other private sector organisations. It is also should provide. They want high-quality, easy-
critical for governments to meet the challenge to-use, personalised services.210 They are open
of doing more with less. Digitalisation of to governments introducing new innovations,
interactions between government and its citizens such as anticipating needs and requirements
has the potential to reduce total departmental and actively contacting people and businesses
expenditure by up to 12 per cent by 2026 about them, and providing a single set of log-in
(Figure 23). credentials for all digital services provided by
Australian governments are already making the Australian Government.211
good progress in innovating service delivery. International evidence has demonstrated that
The Australian Government has established the digital transformation of government service
Digital Transformation Agency to lead digital delivery will be unsuccessful if undertaken
transformation of government services, and without regard to citizen needs and desires.
implemented a Digital Service Standard to Active engagement of citizens with the agencies
ensure that all services designed or redesigned providing services is vital to those agencies
after May 2016 meet certain criteria in service achieving their overarching missions. Improving
delivery, for example, understanding user citizen experience can also increase voluntary
needs.206 The Australian Taxation Office’s use compliance and trust in government, in addition
of chatbots207 has demonstrated a first-contact to making services more cost-effective.212 Key
resolution rate of 80 per cent, exceeding the elements to improving customer experience
industry benchmark of 60–65 per cent.208 The include using behavioural psychology to
Taxation Office also accrued $500 million of manage expectations; reinventing customer
205 United Nations 2016, UN E-Government Survey 2016, UN,

<https://publicadministration.un.org/egovkb/en-us/reports/un-e-government-survey-2016>.
206 Australian Government Digital Transformation Agency 2017, Digital Transformation Agency, DTA, Canberra, <https://www.dta.gov.au>.
207 Virtual assistant that provides tailored responses to customer queries using natural language understanding, conversational
dialogue and advanced resolution techniques, to answer hundreds of commonly asked questions across a range of categories;
Criterion Conferences 2016, Are virtual assistants the future of public sector customer service?, Criterion Conferences, Sydney,
<https://www.criterionconferences.com/blog/government/virtual-assistants-future-public-sector-customer-service>.
208 Criterion Conferences 2016, Are virtual assistants the future of public sector customer service?, Criterion Conferences, Sydney,
<https://www.criterionconferences.com/blog/government/virtual-assistants-future-public-sector-customer-service>.
209 McKinsey Center for Government 2017, Government productivity: unlocking the $3.5 trillion opportunity, McKinsey&Company,
<https://www.mckinsey.com/industries/public-sector/our-insights/the-opportunity-in-government-productivity>.
210 Australian Information Industry Association 2017, AIIA technology and government study, AIIA, Canberra,
<https://www.aiia.com.au/__data/assets/pdf_file/0019/75034/gov-study.pdf>.
211 Dam K 2015, How do Australians really feel about digital government services? Australian Government Digital Transformation Agency,
Canberra, <https://www.dta.gov.au/blog/how-do-australians-really-feel-about-digital-government-services/>.
212 McKinsey&Company 2017, Improving the customer experience to achieve government-agency goals, McKinsey&Company, <http://www.
mckinsey.com/industries/public-sector/our-insights/improving-the-customer-experience-to-achieve-government-agency-goals>.

Figure 23 Potential savings from implementing digital technology, 2026
HR = human resources; IT = information technology

Note: Savings shown are the maximum forecast level.
Source: Blackburn, S, Freeland, M & Gärtner, D 2017, Digital Australia: seizing opportunities from the Fourth Industrial Revolution,
McKinsey&Company, <https://www.mckinsey.com/global-themes/asia-pacific/digital-australia-seizing-opportunity-from-the-fourth-
industrial-revolution>.
Figure 24 (a) Percentage of Australians who strongly agree that governments are using
technology well to deliver services; (b) perceived benefits from government using
the latest technology to deliver services
Note: The study was conducted online among a nationally representative sample of Australians 18 years and over. The sample was 1044
respondents, distributed throughout Australia including both capital city and non-capital city areas.
Source: Australian Information Industry Association 2017 Technology and Government Study, AIIA, Canberra, <https://www.aiia.com.au/__
data/assets/pdf_file/0019/75034/gov-study.pdf>.

journeys using digital and design thinking; innovation. Amazon started out as an online
using customer journeys to empower frontline bookseller. As it grew, it found that its ICT
employees; and establishing metrics and a wasn’t keeping up. To solve the problem,
governance system.213 Amazon’s engineers found a way to decouple
the ICT infrastructure from the applications that
In this regard, Service NSW has set the
ran on it. Amazon subsequently realised they
benchmark for digital government customer
could offer this infrastructure as a platform for
experience in Australia. Since July 2013, Service
other businesses and private users to build
NSW has served more than 47 million customers
value. Today, Amazon Web Services is the
and has maintained a 97 per cent satisfaction
dominant player in the cloud infrastructure
rating.214 Service Tasmania implemented a model
market. Amazon’s process and business
with similar objectives as early as 1998.
model transformation is just one example of a
The Australian Public Service (APS) has a long company’s capability to continually transform
history of effective operation. The Coombs itself. It’s fair to say that the only constant
Royal Commission in the 1970s and the Block element in Amazon’s more than 20-year history
Review in the early 1980s helped to establish a has been its culture of customer-centricity,
public service that was fit for purpose in those frugality and innovation; something its
times. Consistent with these reviews, the APS is founder underlines each year in his letter to
organised, resourced and held accountable on shareholders.
vertical or sectoral lines, and it is internationally
Like many companies in disrupted industries,
regarded as one of the best public services
the APS should continually strive to deliver
across comparative countries. But our economy
better services, and drive innovation and
and society are being fundamentally disrupted,
opportunity in a fundamentally transformed
and we need to ensure that the service remains
economy. To make game-changing innovation in
fit for purpose.
government service delivery, and for government
To achieve game-changing innovation in to drive greater innovation in a transformed
government service delivery, and for government digital economy, the public sector needs much
to drive greater innovation in a transformed more horizontal or cross-sectoral collaboration.
digital economy, the public sector should be It also needs significantly improved policy
designed to work across portfolios and its making and service delivery capability. The
processes designed to exploit digital technology capability we need from the APS in 2030 should
(rather than adding digital technology to legacy also be significantly transformed to fully
organisational structures and processes). Like leverage innovation and digital technology.
organisations facing — or leading — disruption
The recent independent functional and efficiency
in the business world, the public sector needs
reviews across major departments and agencies
to have the capability (including skills, culture,
identified the need to build strategic policy and
technical ability and collaborative methods) to
analytical capability within departments and
work effectively as a whole, and in cooperation
agencies to better meet the future needs of
with other organisations in the economy, to
government. Forty-five per cent of the reviews
deliver the innovative services and policy
identified the need for strengthened strategic
required by business and the public in the 21st
policy and analytical capability.
century.
The reviews may have been valuable for effecting
The digital economy offers a prime example of
incremental change, but notwithstanding
how businesses are creating game-changing
213 McKinsey&Company 2017, Improving the customer experience to achieve government-agency goals, McKinsey&Company,
<http://www.mckinsey.com/industries/public-sector/our-insights/improving-the-customer-experience-to-achieve-government-
agency-goals>.
214 Innovation New South Wales 2017, Service NSW: making life easier, NSW Government, Sydney,
<https://www.innovation.nsw.gov.au/whats-happening/service-nsw-making-life-easier>.

its current strengths the APS should aim for
transformative, not iterative, reform to deliver
in a new digital economy. Government should
consider reviewing the APS to ensure it is
ready to lead the transformation out to 2030
and beyond, as envisaged in this plan. For the
APS to credibly foster greater innovation and
productivity, it will need new mindsets, skills,
and capabilities to deliver innovative digital
services for businesses and citizens.
Recommendations
Recommendation 17: Instruct the Digital
Transformation Agency to explore opportunities
to achieve half of the projected 12 per cent of
savings from digitising service delivery by 2022
and the balance by 2026, while simultaneously
improving citizen satisfaction with government
services. The agency should be resourced to
also:
• benchmark and report on the effectiveness
and efficiency of the use of digital
technologies and the improvement of service
delivery (using automation, advanced
analytics and service delivery dashboards to
monitor and evaluate the impact of spending)
• set a target for citizen satisfaction as part
of the planned assessment of performance
against key performance indicators, and
track the progress of every department
delivering citizen-facing services against it;
for example, by considering the adoption of
the Service NSW approach to benchmarking
and measurement of satisfaction.
Recommendation 18: Conduct a review of
the Australian Government Public Service
with the aim of enabling a greater role and
capability for innovation in policy development,
implementation and service delivery. This work
complements, and could be connected with, the
work of the Secretaries Australian Public Service
Reform Committee.

IMPERATIVE 4
Research and development: Improve research
and development effectiveness by increasing
translation and commercialisation of research
ISA’s vision for Australia’s R&D • Strategic opportunity 4.3: Maintaining

Australia’s high-quality research will require
sector is to maintain the excellence
continued investment in national research
that has become its hallmark, infrastructure, commencing with the nation’s
while increasing the incentives for high-performance computing facilities
collaboration and commercialisation. • Strategic opportunity 4.4: Making the most of
available research talent would be facilitated
ISA sees a key role for government in by promoting greater diversity in the research
accelerating R&D by providing incentives that and innovation workforce
increase commercialisation and stimulate
• Strategic opportunity 4.5: The growing
jobs growth. Universities, publicly funded
momentum in Australian venture capital
research agencies such as CSIRO, research
would be supported by taking measured and
institutions, and industry are also key players
consultative approaches to any intervention.
– generating high-quality research outputs,
training new research talent, actively finding
new opportunities to collaborate, and investing
financially in R&D activity.
Industry–research sector collaboration
Strategic opportunities could be increased by introducing a
for government collaboration premium in the Research
and Development Tax Incentive program
There are five strategic opportunities for
governments to accelerate R&D in Australia by
2030:
Rationale
• Strategic opportunity 4.1: Industry–research
sector collaboration could be increased by Industry and research collaboration, such as
introducing a collaboration premium in the research contracts, consultancies and joint
Research and Development Tax Incentive IP filings, is critical to translate knowledge
program creation to application. It allows universities and
• Strategic opportunity 4.2: Institutional industries access to high-cost infrastructure,
support for commercialisation could be data and talent that they would not otherwise
increased by establishing a dedicated stream have. It also benefits industry, with business
of funding for translational activities impacts up to twice as high for projects with
academic partners.215
215 Dowling, A 2015, The Dowling review of business–university research collaborations, United Kingdom Government,
<http://www.raeng.org.uk/policy/dowling-review/the-dowling-review-of-business-university-research>, p. 15.

Australia has low rates of industry–research
collaboration by international standards. Only Figure 25 Percentage of higher education
5.1 per cent of the expenditure on R&D by the expenditure on research and
higher education sector is financed by industry, development financed by
placing eight of 11 peers (Figure 25).216 Australia industry, 2014
is also ranked 27th of 38 OECD countries for
proportion of publications with industry co-
authors.217
On the research side, there are two main factors
that have contributed to Australia’s lagging
performance. The first is that institutional
researchers have historically faced disincentives
to collaborate with industry or move between
industry and academia. This is because
institutional promotions and government
research funding were allocated based
overwhelmingly on academic measures such
as peer-reviewed papers, rather than industry
collaboration or commercialisation metrics.
Although there are funding programs with the
express purpose of encouraging such links, such
as the CRC programme (where, between 1991
and 2015, 1277 organisations, or 67 per cent
of participants were from industry)218 or the
Industrial Transformation Research Program, the
Note: Data for Israel and Sweden from 2013.
overarching structures remained a barrier.
Source: Organisation for Economic Co-operation and Development
The second factor is the lack of at-scale industry 2017, Main science and technology indicators, OECD, Paris,
<http://www.oecd.org/sti/msti.htm>.
placement programs for higher degree research
(HDR) students, most of whom are PhD students.
These placement programs build a culture Australia as it is in comparable programs around
of collaboration from the critical first years the world.219
of researchers’ careers. Industry placements
The Australian Government has recently
also increase the collaboration skills of those
addressed collaboration incentives. Following
who enter academia and increase the quality
the review of research policy and funding
and quantity of researchers who enter private
arrangements in 2015,220 the Australian
industry. Such programs are a feature of nations
Research Council (ARC) Linkage Projects scheme
that lead in industry–research collaboration.
for competitive funding of projects with an
However, imparting broad transferable skills
industry partner and the Australian Government
is not currently embedded in HDR programs in
Department of Education and Training research
216 Uses 2014 data from: Organisation for Economic Co-operation and Development 2017, Main science and technology indicators, OECD,
Paris, <http://www.oecd.org/sti/msti.htm>.
218 Miles, DA 2015, Growth through innovation and collaboration: a review of the Cooperative Research Centres Programme, Australian
Government, Canberra, p. 42.
219 McGagh J, Marsh H, Western M, Thomas P, Hastings A, Mihailova M, Wenham M 2016 Review of Australia’s Research and Training
System, report for the Australian Council of Learned Academies. <http://acola.org.au/wp/PDF/SAF13/SAF13%20RTS%20report.pdf>.
220 Watt, I 2015, Review of Research Policy and Funding Arrangements, Australian Government, Canberra,
<https://docs.education.gov.au/system/files/doc/other/main_report_final_20160112.pdf>.

block grants were amended to incentivise and this is an issue that requires ongoing work by all
facilitate greater collaboration with industry. parties at scale to achieve long-term change.
Changes included revising ARC guidance to
International industry HDR placement programs
prioritise high-quality proposals involving
such as the French CIFRE (Convention Industrielle
business partner organisations; improving
de Formation par la Recherche)224 and the United
access for SMEs to research collaborations by
Kingdom’s Knowledge Transfer Partnerships
exempting businesses with up to 20 employees
(KTPs)225 have influenced Australian approaches.
from cash contribution requirements; and
Longevity, stability and scale have been key to
improving the incentive for industry collaboration
these programs’ success, providing industry
by harmonising three types of block grants
with a facilitated one-stop shop to access HDR
and increasing the weighting for industry
talent. The number of researchers employed in
engagement in the funding formula. NISA also
businesses in Australia is low226, and programs
tasked the ARC with developing an assessment
such as these can provide a way to help address
system for the engagement and impact of
this. In the most recent evaluation of the KTP,
university research. The resulting engagement
more than 50 per cent of HDR students who
and impact assessment system was piloted in
responded to the survey were employed by the
2017 and will be rolled out at scale in 2018.
KTP partner business immediately after the
Research institutions and the Australian placement had finished.227
Government have also begun to address
Improving incentives for research organisations
industry placements. In mid-2017, the Australian
only addresses half of the research–industry
Government provided support to the Australian
links equation. Building the capability and
Mathematical Sciences Institute to place an
desire of businesses to collaborate with public
additional 1400 PhD interns in industry by the
research organisations is an area that requires
end of 2020 on industry identified and co-funded
further action. As recommended in the review of
short student–industry–academia research
the R&DTI, discussed further under Imperative 2,
projects.221 The government is also responding
a collaboration premium should be introduced
to the Australian Council of Learned Academies
to elicit genuine behavioural change and to
Review of Australia’s Research Training System,
incentivise businesses to reach out to the
which made recommendations in this area.
research sector.
Broader government and sectoral initiatives
are also creating people-to-people connections
with industry for PhD students. Good examples Recommendations
include the Innovation Connections element Recommendation 19: Introduce a collaboration
of the Entrepreneurs’ Programme222 and the premium of up to 20 per cent on non-refundable
Academy of Technology and Engineering’s tax offsets to incentivise collaboration (as
Industry Mentoring Network in STEM.223 However, part of implementing the recommendations
221 Australian Mathematical Sciences Institute 2017, AMSI Intern: national research internships, AMSI, Parkville,
<http://amsiintern.org.au/voucher>.
222 Australian Government 2017, Innovation Connections, Australian Government, Canberra,
<https://www.business.gov.au/assistance/innovation-connections>.
223 <http://imnis.org.au>
224 <http://www.anrt.asso.fr/fr/cifre-7843>
225 <http://ktp.innovateuk.org>
226 Office of the Chief Economist 2016, Australian innovation system report, Australian Government Department of Industry, Innovation
and Science, Canberra,
<https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-Innovation-System.aspx>, p. 64.
227 Warwick Economics & Development 2015, KTP Programme: the impacts of KTP associates and knowledge base on the UK economy,
WECD, Birmingham,
<https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/467141/KTP_Report_July_2015__1-SEP-15_.pdf>.

of the Review of the R&D Tax Incentive, of university research through Excellence in
Recommendation 6 under Imperative 2). Research for Australia found they generally
achieve a high level of quality and productivity
Recommendation 20: Evaluate the benefits
in research. However, there is room to improve
of introducing an industry higher degree by
the levels of knowledge translation and
research placement program at greater scale
commercialisation arising from research activity.
with long-term support, including assessing
the merits of international examples of similar Universities and other publicly funded
programs. research agencies are increasingly active in
translational activities that involve greater
Recommendation 21: Conduct an expert review
industry collaboration. For example, CSIRO’s
in 2022 to evaluate the effectiveness of recent
current strategic focus is on positioning itself
changes that incentivise collaboration, and
as Australia’s ‘innovation catalyst’, which
recommend options for further action. The
has seen a significant shift in emphasis
review should cover, at a minimum:
towards impact and engagement. CSIRO’s ON
• the engagement and impact assessment
Accelerator program, which offers a range of
implemented through the Australian Research
accelerator services for researchers seeking to
Council
commercialise their research efforts, is creating
• funding changes following the Review of a more entrepreneurial culture among research
Research Policy and Funding Arrangements, staff across the publicly funded research sector.
including to the Linkage Program and The program is now being piloted with small
research block grants businesses as part of an ‘ON for SMEs’ program.
• progress on addressing the findings and The Australian Nuclear Science and Technology
recommendations of the Review of Australia’s Organisation is similarly working to engage
Research Training System more with industry. It has announced plans to
• progress on ensuring that university career upgrade its facilities at Lucas Heights to better
paths allow for mobility between academia accommodate a range of industry partners.
and industry Universities are increasing their focus on start-
up support programs228. These are encouraging
• the recommended collaboration premium
trends.
under the R&D Tax Incentive.
The Australian Government is placing greater
emphasis on strategic research investment in
Strategic opportunity 4.2: areas with commercialisation potential. The
Medical Research Future Fund will nearly double
the government’s investment in medical research
Institutional support for
over the next decade, with a strong focus on
commercialisation could be increased
translational and mission-directed activity, such
by establishing a dedicated stream of
as clinical trials. Investments in Defence R&D
funding for translational activities through the Next Generation Technology Fund,
the Defence Innovation Hub and the Centre for
Defence Industry Capability are intended to
Rationale secure higher levels of innovation and greater
sovereign capability. These trends will assist
Australia’s research organisations produce
Australian researchers to achieve greater
world-class research outputs, and are generally
impact, and increasingly require them to work in
adapting well to changing market conditions.
multidisciplinary teams.
The Australian Government’s assessment
228 Universities Australia, Universities and the startup economy, Universities Australia, Canberra,
<https://www.universitiesaustralia.edu.au/australias-universities/Universities-and-the-startup-economy>.

case study 7 Anatomics: from start-up to international success
Imagine a future where a surgeon needing Research and development has been critical
to replace a patient’s damaged bone or joint to developing Anatomics’ breakthrough
takes a scan of the body part and emails it to technology. Anatomics founder, Mr Paul
an onsite manufacturer, who then prints off D’Urso, first began the research that led
the customised implant and rapidly delivers to the formation of the company in 1995
it for use in surgery. with a $1200 grant from the hospital he
worked in, and support from the Queensland
Such a scenario is no longer just in the realm
Government.
of science fiction. Advanced manufacturing
techniques and developments in computer Later, Anatomics’ research partnerships with
sciences, pioneered by the Australian firm Australia’s national science agency CSIRO
Anatomics, are making customised implants was also crucial, enabling the company to
a reality. draw on specialist expertise in disciplines
such as materials science, and granting them
Anatomics is a Melbourne-based, Australian-
access to cutting-edge infrastructure, such
owned innovative medical device and
as CSIRO’s Lab 22 facility in Melbourne,
software company that pioneered the use
which helped to design and print the
of 3D imaging and printing to manufacture
titanium sternums.
surgical implants from advanced composite
materials that are revolutionising patient Anatomics is creating social and economic
care in a range of applications. potential. Its technology has the potential
to revolutionise the prosthetics industry,
The technology has recently been used to
as custom-made implants are often
design a world-first 3D-printed titanium and
more durable, better fitting and cheaper
polymer sternum, which was successfully
than currently available ‘off-the-shelf’
implanted into a British patient who had
alternatives. The company exports to around
previously had his sternum removed because
40 countries and has created highly skilled
of a rare infection. Another was implanted
roles working at the global forefront of
in to an American patient after a tumour was
medical technology.
removed from her sternum.

While publicly funded research agencies are Importantly, commercialisation activities do
improving commercialisation activity,229 it is not occur in a vacuum – they are a product
clear Australia needs to do more. Australia of, and influenced by, their local context.
lags behind its peers for start-up formation There is a significant body of evidence that
(Figure 26) and for the share of higher education ‘innovation districts’ can help drive more
revenue derived from industry. effective collaboration and commercialisation.
When established well, these districts drive
Two barriers to commercialisation of research
disproportionate innovation, employment
are competition for staff time and the availability
and economic growth.231 The clustering of
of staff with relevant commercial skills. At
industries and workers that occurs, usually in
present, commercialisation activities must
knowledge-intensive roles, attracts additional
compete within research organisations for
entrepreneurs and innovative industries.
resources that could otherwise be spent on core
This in turn drives up average incomes, gross
activities. Dedicated funding, appropriately
value add (GVA) and exports. This is borne
allocated, would ensure that a minimum level
out internationally, including in the United
of resource is allocated to translational and
Kingdom where ‘innovation districts’ make
engagement activities, which have a significant
up 8 per cent of businesses but contribute
multiplier effect on overall commercialisation
20 per cent of the GVA.232 Similarly, in NSW,
activity. A study of the United Kingdom’s Higher
‘hotspots’ with highly concentrated industries
Education Innovation Fund (HEIF) found a £6.4
with over 1000 employees registered growth
return in ‘knowledge exchange’ income for every
of 2.7 per cent, as opposed to average growth
£1 of HEIF income received.230
Figure 26 Australian start-ups formed as a result of research and development
Source: Australian Government Department of Industry, Innovation and Science, National Survey of Research Commercialisation, DIIS,
Canberra, <https://industry.gov.au/innovation/NSRC/Pages/default.aspx>.
229 Australian Government Department of Industry, Innovation and Science 2015, National Survey of Research Commercialisation (NSRC),
DIIS, Canberra, <https://industry.gov.au/innovation/NSRC/Data/2015/Documents/Data-Summary-2013-15.pdf>.
230 Ulrichsen TC 2015, Assessing the economic impacts of the higher education innovation fund: a mixed-method quantitative
assessment, report for the Higher Education Funding Council for England, London.
231 Brookings Institute, Innovation districts, Brookings Institute, Washington, DC, <https://www.brookings.edu/innovation-districts>.
232 McKinsey&Company 2014, Industrial revolutions: capturing the growth potential, McKinsey&Company.

in NSW of 1.2 per cent. Job growth in these
77 hotspots accounted for more than one in four
jobs created from 2006 to 2011. 233
Maintaining Australia’s high-quality
Around Australia, governments at the state,
research will require continued
territory and local levels are demonstrating
investment in national research
increased interest in fostering innovation
infrastructure, commencing with
precincts in their own jurisdictions.234 This is a
the nation’s high-performance
welcome trend, given that most evidence points
computing facilities
to the critical role of local leadership in driving
successful innovation precincts. However, to fully
realise the potential of these developments, it
will be important for the Australian Government Rationale
to work with state and local governments and
Investing in world-class national research
to outline its role in supporting such precincts.
infrastructure is critical to Australia’s research
Areas for consideration should include removing
proposition. Knowledge creation increasingly
regulatory barriers, aligning policy, and capability
requires access to large-scale capital equipment,
building through sharing of best practice, skills
digital technologies and expert operators,
development and funding support.
particularly in strategic areas such as STEM
disciplines. High-quality national research
Recommendations infrastructure also helps attract and nurture top
talent, and builds a global reputation for high-
Recommendation 22: Increase impact research.
commercialisation capability in research
Recent funding initiatives, including the Medical
organisations by establishing a new stream of
Research Future Fund and the Biomedical
funding for translational activities.
Translation Fund, will increase demand for
Recommendation 23: Develop and release an sophisticated, advanced research infrastructure.
Australian Innovation Precincts Statement to
Although national research infrastructure is
shape Australian Government involvement in
used by both industry and public researchers, it
emerging localised innovation ecosystems in
is commonly provided by government because
cities and regions.
infrastructure has a high fixed cost, with smaller
benefit accruing to each user. International
studies have shown high return on investment
for research infrastructure. The benefit of the
European Bioinformatics Institute is estimated
at $1.7 billion – 20 times its operational cost of
$79 million per year.235 The 2014 KPMG report
on Australia’s National Collaborative Research
Infrastructure Strategy (NCRIS) noted that NCRIS
has made a substantial contribution towards
233 Jobs for NSW 2016, Jobs for the future: Adding 1 million rewarding jobs in NSW by 2036, Jobs for NSW, Sydney, https://www.
jobsfornsw.com.au/__data/assets/pdf_file/0020/90740/Jobs-for-the-future-full-report-August-2016.pdf, pp. 36–37.
234 For example, the Melbourne Innovation Districts initiative: <https://mid.org.au>.
235 Australian Government Department of Education and Training 2016, 2016 National Research Infrastructure Roadmap, DET, Canberra,
<https://www.education.gov.au/2016-national-research-infrastructure-roadmap>, p. 9.

scientific research capability as well as research disease and high-risk zoonotic diseases,
outcomes in Australia.236 is a unique national capability that needs
to be upgraded to ensure compliance with
In December 2015, the Australian Government
regulatory requirements.
reaffirmed its commitment to national research
infrastructure through NISA. It secured
operational funding for the existing facilities Recommendations
and projects of the NCRIS, and funding for the
Australian Synchrotron and the Square Kilometre Recommendation 24: Establish secure, long-
Array. Further, it commissioned the development term funding for national research infrastructure,
of the 2016 National Research Infrastructure in accordance with the recommendations of the
Roadmap.237 2016 National Research Infrastructure Roadmap.
The National Research Infrastructure 2016
Roadmap identified nine areas of key national
research infrastructure requiring additional Strategic opportunity 4.4:
investment to maintain a leading edge in
research. It also identified two facilities requiring Making the most of available
urgent consideration: research talent would be facilitated
• Australia’s fastest supercomputer, the by promoting greater diversity in the
National Computational Infrastructure, research and innovation workforce
currently ranks 70th in the world, down from
24th when it was first installed in 2012.
The supercomputer will reach the end of its Rationale
operational life in 2018.238 Australia’s second
supercomputer, Pawsey Supercomputing Studies have found that increased gender
Centre, will reach the end of its operational diversity in research teams improves
life in 2019. Australia’s innovation and innovation.239 ISA’s performance review found
research capability and ability to meet that a weakness of Australia’s Innovation,
international and national obligations depend Science and Research system is that it remains
on these high-performance computers being part of a gender-unequal society.240 Women
upgraded. make up fewer than one-third of STEM academic
• The Australian Animal Health Laboratory, and research staff and only 17 per cent of STEM
which supports research in exotic livestock
236 KPMG 2014, National Collaborative Research Infrastructure Strategy project reviews: overarching report, KPMG,
<https://docs.education.gov.au/system/files/doc/other/ncris_project_reviews_final_report_web.pdf>.
237 Australian Government 2017, National Innovation and Science Agenda, Australian Government, Canberra,
<https://www.innovation.gov.au>.
238 National Computational Infrastructure 2017, NCI named Australia’s fastest supercomputer, NCI, Canberra,
<http://nci.org.au/2017/06/19/nci-named-australias-fastest-supercomputer>;
Australian Government Department of Education and Training 2016, 2016 National Research Infrastructure Roadmap, DET, Canberra,
<https://www.education.gov.au/2016-national-research-infrastructure-roadmap>, p. 9.
239 Díaz-Garcia, C, González-Moreno, A & Sáez-Martínez, FJ 2013, ‘Gender diversity within R&D teams: its impact on radicalness of
innovation’, Innovation: Management, Policy and Practice, vol. 15, no. 2, pp. 149–60; Schnieder, J & Eckl, V 2016, The difference
makes a difference: team diversity and innovative capacity,
<https://www.oecd.org/sti/015%20-%20SKY_Schneider_Eckl_201607025.pdf>.
<https://industry.gov.au/Innovation-and-Science-Australia/Pages/default.aspx>, p. 94.

case study 8 Pawsey supercomputer: critical national research
infrastructure
Big science and research problems require Professor Lisa Harvey-Smith, Group Leader at
big computers with processing ‘grunt’ to CSIRO’s Australia Telescope National Facility,
model and simulate complex systems that appreciates the scale of the challenge.
would be too expensive or impossible to
‘Once we have all 36 of the ASKAP
physically demonstrate.
telescopes working, we’re going to
Australia is home to two nationally have about 72 trillion bits per second of
significant research supercomputing information,’ Dr Harvey-Smith said. ‘These
facilities: the Pawsey Supercomputing Centre supercomputing facilities are essential for us
in Perth and the National Computational to even use the telescope at all.’
Infrastructure in Canberra. The Pawsey
The Australian Government has contributed
supercomputing facility supports some
to Pawsey’s establishment through the
1249 users from across 90 partners and
Super Science initiative, and provides
institutions each year.
a level of ongoing operational funding
No-one appreciates a big question like an through the National Collaborative Research
astronomer. Astronomers working on the Infrastructure Strategy. Pawsey attracts
Australian Square Kilometre Array Pathfinder significant ongoing co-investment from the
(ASKAP) – a precursor to the world’s CSIRO, the university sector and the Western
biggest telescope, the Square Kilometre Australia Government.
Array (SKA) – will be investigating around
The SKA precursor telescopes and
600,000 galaxies in a bid to gain a better
supporting research infrastructure have
understanding of how galaxies have formed
increased Australia’s ability to be an active
and evolved.
contributor in the global SKA consortium.
Photograph: Ant Schinckel

professors are female.241 Women comprise awareness of gender diversity in government
16 per cent of the STEM workforce.242 programs.
The Australian Government, through NISA, has
supported programs to encourage diversity in
STEM, including Science in Australia Gender Strategic opportunity 4.5:
Equality, Male Champions of Change in STEM,
and the Women in STEM and Entrepreneurship The growing momentum in Australian
grants program.243 These programs are important venture capital would be supported
and welcomed. They build on and complement by taking measured and consultative
initiatives being pursued throughout the sector. approaches to any intervention
However, to achieve meaningful impact they need
to be sustained over an extended period of time.
Rationale
Recommendations Venture capital is a crucial enabler for spin-off
Recommendation 25: Maintain a long-term companies from research, and has historically
policy commitment to achieving greater gender been limited in Australia. The situation is
diversity in the science, technology, engineering improving rapidly, with Australian venture capital
and mathematics workforce, including by raising growing from $124 million in funds raised in
Figure 27 Australian venture capital funds raised per year, 2007–17
Source: Australian Private Equity & Venture Capital Association 2017, The venture capital effect: a report on the industry’s impact on the
Australian economy, AVCAL, Sydney, <https://www.avcal.com.au/documents/item/1428>; data for 2017 are preliminary.
241 Office of the Chief Scientist 2016, Women in STEM: a story of attrition, Datasheet 2, Office of the Chief Scientist, Canberra,
<http://www.chiefscientist.gov.au/wp-content/uploads/OCS_Women_in_STEM_datasheet.pdf>.
242 Office of the Chief Scientist 2016, Australia’s STEM workforce: science, technology, engineering and mathematics, Office of the Chief
Scientist, Canberra, <http://www.chiefscientist.gov.au/wp-content/uploads/Australias-STEM-workforce_full-report.pdf>.
243 Australian Government 2017, National Innovation and Science Agenda: opportunities for women in science, technology, engineering
and maths, Australian Government, Canberra, <https://www.innovation.gov.au/page/opportunities-women-stem>.

2014 to $568 million in 2016. It is expected to innovation companies, and the Crowd Sourced
top $1 billion in 2017 (Figure 27).244 Equity Funding legislation (the Corporations
Amendment (Crowd-sourced Funding) Bill 2016)
The composition of this increased supply is
introduced in 2017, are also expected to improve
perhaps more significant than its volume. It
capital availability. However, government
is especially encouraging to note the recent
intervention in risk capital markets is notoriously
engagement by institutional investors as lead
challenging. Therefore, given this vigorous
funders in a number of the private venture capital
activity, government should take a measured
funds, including Airtree Ventures, Blackbird
approach to any further intervention, informed by
Ventures, Square Peg, Carthona Capital, and
expert advice.
in each of the Biomedical Translation Funds
managed by Brandon Capital, One Ventures
and BioScience Managers. Some of our largest Recommendations
superannuation funds, including AusSuper,
HostPlus, State Wide Super and First State Recommendation 26: Direct Innovation and
Super, have now supported a number of these Science Australia to monitor emerging sectors of
venture capital funds, demonstrating an high growth in the economy and report annually
emerging appetite for the risk–reward profile to the Australian Government on the adequacy of
that is intrinsic to venture capital investing. risk capital supply.
Longer-term investment periods and illiquidity
relative to publicly traded shares and bonds, are
some of the characteristics of venture capital
investments that have traditionally caused
Australian superfunds to avoid their inclusion in
asset allocations.
The business community’s interest in corporate
venture capital and corporate accelerator
programs is also increasing, and international
investors have begun to take a greater interest
in Australian technology. The IP Group, based in
the United Kingdom, has committed to invest at
least $200 million in spin-off companies based
on the intellectual property developed by the
Group of Eight universities in Australia and the
University of Auckland in New Zealand.245
Recent government interventions following
the release of NISA have increased the capital
available and should be maintained. These
include the newly created $500 million
Biomedical Translation Fund and the $200 million
CSIRO Main Sequence Ventures fund. Reforms to
investment vehicles, including improvements to
Early Stage Venture Capital Limited Partnerships,
tax incentives for investment in early-stage
244 Australian Private Equity & Venture Capital Association 2017, The venture capital effect: a report on the industry’s impact on the
Australian economy, AVCAL, Sydney, <https://www.avcal.com.au/documents/item/1428>, p. 72; Baldassarre, G 2017, ‘$1 billion
raised in Australian venture capital over the last year’, Startup Daily, 14 June,
<http://www.startupdaily.net/2017/06/1-billion-raised-australian-venture-capital-last-year-report-finds>.
245 IP Group 2017, IP Group plc: commits A$200m in landmark deal with 9 leading universities in Australia and New Zealand, IP Group,
London, <http://www.ipgroupplc.com/media/ip-group-news/2017/2017-05-30>.

IMPERATIVE 5
Culture and ambition: Enhance the national
culture of innovation by launching ambitious
National Missions
The recommendations in the Strategic opportunities for

previous four imperatives focused government
on specific aspects of the innovation
system. Although these are important, The Australian Government has a strategic
opportunity to use ‘National Missions’ to
they do not operate in a vacuum. Each accelerate Australian innovation and encourage
will play out against the backdrop of more collaboration across the innovation system.
the national innovation culture. And for National Missions are large-scale initiatives,
the whole 2030 Plan to be successful, catalysed by governments, that are designed
that culture needs to evolve. to address audacious challenges. They are a
powerful means to inspire innovators, develop
Australia’s culture is made up of ‘the stories we solutions to big problems, and generate national
tell ourselves about ourselves’.246 Our national passion and pride in innovation and science
stories blend pragmatism, egalitarianism, and achievements. Australia has a grand tradition of
a streak of irreverence. Importantly, they are National Mission-style projects, from building
not fixed – they evolve slowly over time, as each the Snowy Mountains Scheme to hosting key
new generation writes its own chapters. From components of the international effort to build
an innovation perspective, they matter because the Square Kilometre Array. Australia 2030:
they shape how we see our world – and what we prosperity through innovation can build on this
believe is possible – through the way we view tradition.
opportunity, failure and risk.
National Missions will challenge potential
Looking to 2030, ISA sees an opportunity to add Australian innovators to excel, and demonstrate
a more ambitious chapter on innovation to our to the world that Australia can deliver
evolving national stories. We see a future as an breakthrough innovation. Chosen well, they will
innovation-strong nation that is also innovation catalyse activity around Australia’s comparative
proud. We see people and institutions who advantages, and include the entire community
think differently, collaborate in new ways, and on the journey of creating Australia’s future.
take more calculated risks. We see a nation The missions will also reinforce and support
that is galvanised around significant national other imperatives in the 2030 Plan, such as
challenges, and unafraid to tackle some of our collaboration, talent attraction, and seeding
biggest problems. high-growth businesses. As participants in the
246 Geertz, C 1973, The interpretation of cultures, Hutchinson, London.

Parramatta consultation forum conducted as part Genomics is the study of genomes, the entirety
of the ISA review noted: of our DNA. Precision medicine is the application
We need to make innovation a cultural activity of clinical and laboratory data, including genetic
so that it permeates through everything data, gathered in aggregate across a population
that we do and the way that we think. of healthy and ill people, to better guide the
management of an individual patient.
National Missions will be large-scale, complex
undertakings. They will challenge assumptions Genomics and precision medicine will play an
of what is possible, and force us to find new increasing role in improving health outcomes,
ways to deliver outcomes. They will see public drawing on accelerating developments in gene
and private sectors coming together, and novel sequencing and data analytics. We see genomics
methods developed to finance and manage risk. and precision medicine playing a role in:
They will need our brightest talents to solve our • earlier diagnosis – allowing a greater range
biggest problems with technological and social of targeted, cost-effective population genome
solutions. screening programs to identify rare and
chronic diseases, especially cancer, earlier
No mission will be perfect. There will be failures,
than ever before
pivots and public debates. But, as John F
Kennedy said of the Apollo program, ‘We choose • prevention – enabling targeted public
to go to the moon in this decade and do the other health campaigns, more specific cohort
things, not because they are easy, but because screening, increased awareness of individual
they are hard’.247 susceptibility, and self-management of
lifestyle and prevention activities
And therein lies the most important return on
• better and safer treatments – facilitating
investment from this imperative: an Australian
individual drug and treatment matching,
nation that can take on National Missions of this
enabled by integration of genetic data
scale will proudly make innovation a core part of
with phenotypic data (the observable
our national story and culture.
characteristics of an individual resulting
from the interaction of its genotype with the
Strategic opportunity 5.1 environment), gene therapy and gene editing
assisted by AI and ML.
While aspiring to be the healthiest country on
A Genomics and Precision Medicine
Earth sounds ambitious, Australia currently
National Mission will be an ideal
achieves an average life expectancy of 82.5 years
first mission, delivering health and
– the 6th highest in the world – through health
innovation benefits for all Australians
expenditure per person of only US$4493, the
14th-highest in the world (Figure 28).
Consultation during the 2030 Plan’s Any single international metric of population
development identified a strong candidate health has its limitations given the diversity
project to demonstrate the value of National of causes of premature death and disability
Missions: using genomics and precision by disease and country. Nonetheless, it is
medicine to help Australia become the healthiest feasible for Australia to become the number
country on Earth. one country for both life expectancy and quality
adjusted life years, and in doing so lead the
world in intelligent, efficient and cost-effective
health delivery.
247 National Aeronautics and Space Administration 2017, Text of President John Kennedy’s Rice Stadium moon speech, NASA,
Washington, DC, <https://er.jsc.nasa.gov/seh/ricetalk.htm>.

Figure 28 Life expectancy vs health expenditure per person

Source: Organisation for Economic Co-operation and Development 2017, Better life index, OECD, Paris, <http://stats.oecd.org/Index.
aspx?DataSetCode=BLI>; Organisation for Economic Co-operation and Development Health expenditure and financing data, per capita
(current prices), OECD, Paris, <https://data.oecd.org/health.htm>.
Why genomics and precision and clinicians – all essential for the delivery of
medicine, and why now this mission.
Australia’s health and medical research
The application of genomics to medicine is a
community is well connected to the substantial
compelling choice to demonstrate the power of
international efforts currently under way in
a National Mission program. Health outcomes
this area. This will enable us to build on and
are critically important to Australia’s national
leverage the investments of others, while also
interest because we need a healthy and
contributing to advancing the state of the art.
productive population to sustain our nation’s
Close international collaboration will serve to
economy. Health outcomes also determine
both de-risk and accelerate the progress of
Australians’ quality and length of life; health
the mission.
matters deeply to Australians, making it an
inspiring field in which to set high national Australia has already made substantial forward
ambitions for innovation. commitments to the health sector. The Medical
Research Future Fund is forecast to double
Australia starts from a strong position to tackle
medical research funding within a decade, while
this mission, with a high-quality healthcare
$500 million has already been committed to
system, a robust medical research community,
the Biomedical Translation Fund. This gives us
and strong international linkages to other
a strong base for the pursuit of major medical
healthcare systems. We have a strong genomic
research and medical innovation projects.
sequencing capacity, as well as an expanding
group of bioinformaticians, geneticists, The possibility of making significant medical
bioethicists, genetic counsellors, pathologists, discoveries in the areas targeted by the mission

is becoming much more feasible. This is due • Australians with serious chronic disease,
to improvements in the performance and cost including cardiovascular, metabolic and
of key enabling technologies, such as genome inflammatory disorders
sequencing (Figure 29), computing power, AI • children with rare diseases.
and ML. Along with increased access to data
and data analysis tools, these technological Genomic analysis of these and other cohorts
improvements are increasing our research will help to deliver personalised diagnostics and
power, and opening up opportunities for accelerate the advent of preventative, precision
continuing healthcare improvements. medicine.
Program outline Benefits from the mission
The Genomics and Precision Medicine National The mission has been chosen partly for its
Mission would advance genomic research and ability to deliver far-reaching benefits over time,
bioinformatic capability, focused in the first such as:
instance on selected patient cohorts. These • improved health for Australians today, and the
cohorts should be selected based on clinical next generations of Australian children
utility, cost effectiveness, and maximising • better and earlier diagnoses, and the
potential translation to clinical practice. Such avoidance of unnecessary or erroneous
an approach would build on and leverage major therapeutic interventions
international initiatives. Such cohorts may • benefits from accelerating the impact
include: of pharmacogenomics (where genomic
• families with histories of cancer, especially information is used to predict individual
focusing on younger family members responses to drugs), and a reduction in
• Australians affected by the most common adverse drug reactions, from the integration
types of cancer, including breast, prostate, of phenotypic and genetic patient information
lung, bowel and colon, and pancreatic cancer
Figure 29 Cost per genome, 2001–15
Moore’s law = that the number of transistors in an integrated circuit doubles approximately every two years
Source: National Human Genome Research Institute 2016, The cost of sequencing a human genome, NHGRI, Bethesda,
<https://www.genome.gov/27565109/the-cost-of-sequencing-a-human-genome/>.

case study 9 Garvan Institute: genome sequencing: the prospects for
genomics and precision medicine
Caring for a loved one with a rare genetic the entire genome of individuals in an effort
condition can be a frustrating, emotional to diagnose their genetic conditions.
and lengthy process. Although individual
The work became urgent when Alan’s health
conditions are rare, the aggregate of all
suddenly deteriorated, leaving him critically
rare conditions is significant: conservative
ill in hospital and facing an uncertain future
estimates are that 6 per cent to 8 per cent
unless the condition could be treated. The
of Australians have a rare condition, and
sequencing of Alan’s genome enabled his
80 per cent of these conditions are genetic
medical team to quickly pinpoint the genetic
in origin.
variation responsible for the condition.
Recent achievements in genome sequencing Medical researchers scanned medical
by Australian researchers now allow life- literature and discovered that a new drug
changing care for those with rare conditions, had been trialled in the United States with
often enabling detection of the precise patients having the same genetic variation,
genetic variation causing the disease, with promising results. Special access to the
and treatment approaches tailored to the drug was rapidly approved for Alan.
individual.
The results were life changing. After Alan
At the age of three, Alan was diagnosed with started the drug, his platelet, neutrophil and
a rare condition in which his immune system red blood cell counts miraculously reached
attacked his blood cells. The condition was their normal range over time, putting his life
potentially life-threatening, and his medical out of danger.
specialists did not know what was triggering
Six months later, he was well enough to go
the immune reaction, and therefore could not
to school for the first time, and able to ride a
treat the underlying cause.
bike and play like other children.
At age seven, Alan was accepted into a
The identification of the gene variant
research program run by the Garvan Institute
responsible is now also enabling researchers
of Medical Research in Sydney to sequence
to research new precision treatment options.

• identification of novel indicators of and commercial development. The governance
conditions relevant for development and structure will also need to be designed so that
commercialisation of new medical technology it creates an appropriate platform for private
• better and tailored decision-making tools for sector engagement with the mission, maximising
patients and providers harnessing cutting- the potential for creation of new businesses
edge technology including AI and ML and business models based on the genomic
data resource.
• growth in the size, sophistication and efficacy
of health and medical data, supported by Key stakeholders, particularly federal, state
increased interoperability across healthcare and territory health agencies, will need to be
systems. This will rely on the $374 million involved in the design and establishment of a
commitment in the 2017–18 Budget for the national structure to provide governance and
Australian Digital Health Agency to roll out leadership. The National Health Genomics
the My Health Record (MHR) to 20 million Policy Framework currently under development
Australians on an opt-out basis, by the end will provide a vital mechanism for alignment of
of 2018. The MHR will provide an essential these stakeholder groups. The lessons learned
platform for digital health records and will from recent Genomics Englands’ programs may
require interoperability across healthcare provide valuable guidance.
systems to drive the access, storage and
Mission progress will be aided by the existing
integration of diverse data systems, including
capability and capacity in Australia in integrating
genomics data.
genomics into clinical care and in sequencing
The groundwork for this Genomics and Precision and data analytics.
Medicine National Mission has been well
prepared by the domain experts and practitioner
members of the Australian Genomics Health Recommendations
Alliance. It is a mission that can serve as a Recommendation 27: Establish a National
foundation for the broader systematic effort Mission to help make Australia the healthiest
to create a more human-centred, wellness- nation on Earth, with a step-change investment
focused healthcare system, driven by data and in our national genomics and personalised
preventative, diagnostic breakthroughs. medicine capability and its integration into our
medical research and healthcare system.
Governance and implementation
The lead contribution by the Australian Strategic opportunity 5.2
Government to the funding for the research and
associated whole-genome sequencing, data
Ensuring Australia’s National Missions
storage, analytics, and human capital resourcing
are effective can be achieved through
will be approximately $200 million during the
the development of a robust framework
initial five years. This could possibly be sourced
from the Medical Research Future Fund. This core to identify and implement missions
funding is likely to require matching support
by participating states and territories, industry
and philanthropy, depending on the number To advance the discussion around National
of genomes sequenced and interpreted from Missions, ISA has developed a framework to
approved cohorts. identify and implement National Missions that are
robust, achievable, and in the national interest.
A well-designed, national governance structure This would form the basis for the ongoing
will be essential to cover the issues of ethics, development of National Mission opportunities.
privacy, insurance and legal matters, protocols
and management of data storage, as well as
data access and secondary use for research

Many challenges of scale require sustained and challenges, to catalyse novel and new, rather
significant investment for many years. They than incremental, innovations leading to clear
also need a broad base of support to achieve outcomes. Their potential for impact should
long-term commitment and impact, discipline be ambitious enough for all Australians to see
in selection and development of projects, and and support the endeavour
a sophisticated approach to managing risk and • able to bring about a step-change in
dealing with failure. A robust framework for Australia’s innovation capacity and culture
identifying, developing and validating missions – Missions need to inspire Australians to
is essential to ensure those chosen are credible, aim high and dream big, catalysing lasting
cost effective and beneficial. shifts towards a culture of innovation and new
approaches across the innovation system.
They need leaders to sponsor the mission and
National Mission identification a narrative that inspires innovators and the
National Missions should be chosen because community to invest in the mission and the
they are bold, inspiring and in the national Australian innovation system. They should
interest. Before confirming a National Mission, also show that they can engage a broad
the candidate concept should be assessed base of support, including leading experts,
against clearly-defined criteria, through an open industry, the Australian public and bipartisan
process that encourages diverse inputs. ISA political support.
proposes three criteria for selecting missions.
Missions should be:
National Mission implementation
• robust, credible and in the national interest –
Missions should address a significant threat, Missions need to be ambitious, but not
gap or opportunity facing Australia that aligns improbable. Mission implementation planning
with a current national priority. They should should include an assessment of feasibility,
build on an area of existing or potential based on the potential of the opportunity, the
market advantage with a high possibility technical and project management capability
of benefits. These could include direct and within Australia to undertake it, and the
indirect economic, social or environmental likelihood of being able to develop a rigorous
benefits specific to the Australian context, and flexible approach to execution. The
but with potential global impact. Missions Apollo 11 program, for example, was highly
should also show potential to build long- ambitious, but was based on sound science and
lasting Australian capability in the area or informed by data on the projected capacity of
advantage they are targeting. Missions should the American industrial base. The program was
be robust and informed, demonstrating that also constructed as 23 separate missions and
they are cost-effective and credible through designed to spread risk, with built-in capacity to
the preliminary design process learn from errors and make improvements along
• bold and new – Missions should be the way.248 In Australia, CSIRO’s experience with
imaginative and inspiring, motivating people its Flagships program, launched in 2003, can
to identify an ideal future and work back from provide useful lessons to inform implementation
it. They should focus on paradigm-shifting of National Missions.249
248 Geraci, J 2017, ‘What your moonshot can learn from the Apollo Program’, Harvard Business Review, 4 April,
<https://hbr.org/2017/04/what-your-moonshot-can-learn-from-the-apollo-program>.
249 Australian National Audit Office 2011, The development and administration of national research flagships, ANAO, Canberra,
<https://www.anao.gov.au/work/performance-audit/development-and-administration-national-research-flagships>.

ISA proposes that each National Mission is Identifying potential future missions
assessed against four factors to ensure that a
sound implementation approach is in place. Along with the Genomics and Precision Medicine
Missions should: National Mission, ISA has identified two other
promising candidate missions for consideration,
• involve the right people – National Missions
as part of a wider process to identify additional
should demonstrate that they will have an
future National Missions. These additional
independent governance structure that will set
candidates are:
strategy, design programs, allocate budgets and
coordinate research and innovation to maximise • Restore the Reef: Preserving the Great Barrier
impact. They will need to show involvement of Reef beyond 2030 – This mission would
all key players, including identifiable mission build on Australia’s position at the forefront
‘champions’, experts across industry, research of reef management and marine research to
institutions and government, and the support of deliver the world’s largest reef re-engineering
government and domain leaders program to increase its resilience to climate
change
• be designed for success – The mission will need
to demonstrate thoughtful design, including • Hydrogen City – This mission would lay the
a clear articulation of the long-term vision, groundwork for decarbonisation of direct-
the strategy to achieve it – including credible combustion sector, currently responsible for
starting points – and the desired impact of the 18 per cent of Australia’s greenhouse gas
mission. Validation of design feasibility should emissions, by converting the gas supply of an
also consider technical, economic, social, and entire Australian city from natural gas to clean
political issues that may affect a promising hydrogen.
concept. Forecasting techniques could also be See Appendix A for further details of these
used to identify long-term trends and how an missions.
issue relevant to the mission may evolve
• have a flexible roadmap – Breakthrough
research is an inherently uncertain endeavour, Recommendations
and National Missions will need to allow Recommendation 28: Adopt a framework to
for rapid adaptation to new developments continue to identify and implement additional
throughout their life, and to deliver both National Missions.
short and long-term outputs. This could
include identifying early milestones for
impact opportunities or ‘low hanging fruit’
to sustain long-term support; constructing
mission elements to spread risks across sub-
projects; and, supporting the development of
ancillary areas and applying mission solutions
elsewhere, avoiding reliance on ‘achieving the
moonshot’ alone to make progress
• maximise the flow-on benefits of the
mission – National Missions will need to
be designed to anticipate and deliver both
short and long-term benefits. This includes
optimising the design of the project so that
potential spillover benefits can be harnessed
during implementation. National Missions
could be undertaken with other countries
or consortia where collaboration is required
to achieve scale, international buy-in or to
accelerate results.

94
Section C:
Roadmap
for action
Funding, implementation
and monitoring
Sections A and B of this report facilitation, CRCs, CRC Projects, IGCs and the
proposed stream of funding for translational
define imperatives for action to improve
activities for research organisations. These can,
Australia’s innovation capabilities to a certain extent, be sized to match broader
and performance. Governments must budgetary constraints. National Missions are
act swiftly to consider and act on the expected to draw on a range of funding sources,
recommendations in the 2030 Plan so both at the Austrlian and state and territory
government level, as well as from commercial
that Australia can be counted within
and philanthropic sources.
the top tier of innovation nations and
Fundamentally, the aim of Australia 2030:
achieve sustainable prosperity for its prosperity through innovation is to use strategic
citizens. activity and investment by governments to
trigger significant increases in funding for R&D
This section examines the way forward in
from other sources, rather than to significantly
terms of funding implications, implementation,
increase the investment made by governments.
leadership and collaboration, and performance
An overarching aim of the 2030 Plan is to return
monitoring.
business investment in innovation activities
(measured using the proxy of BERD) to a stronger
growth rate and to a higher share of GERD by
Funding implications 2030 (Figure 30).
The recommendations in this plan focus on how Figure 30 shows indicative projections of R&D
governments can contribute to the effective expenditure on the basis that the 2030 Plan is
functioning of Australia’s innovation system. fully implemented and business expenditure on
This includes actions to regulate and shape the R&D as a percentage of GDP returns to strong
system more effectively, actions to be a stronger growth. Consistent with our goal of being a top-
customer and catalyst for innovation in the tier innovation nation, ISA projects:
system, and investments that support critical
• business expenditure on R&D under the
enabling activities that would not occur at all, or
moderate growth scenario could reach
as effectively, without government support.
1.7 per cent of GDP by 2030, and return to
ISA has sought to shape its recommendations the previous growth trend of the past two
in a manner that respects the near-term fiscal decades, if it could achieve a growth rate
challenges enunciated by the Australian of 8 per cent per year in nominal terms over
Government. In many cases, the funding 2018–30.250 However, if the policy mix can
requirements associated with recommendations be further strengthened by focused iterative
are negligible, such as suggested changes improvement, then business expenditure on
to regulatory frameworks or for reviews of R&D under the high growth scenario could
current institutions and arrangements. In other reach 2.2 per cent of GDP through a real
cases, we have recommended incremental growth rate of 10 per cent, which corresponds
direct investments in areas such as export approximately to the growth rate seen in the
250 The long-term growth trend for business expenditure on R&D in real terms was around 6% per year (1999–2015); ISA analysis.
96 Section C: Roadmap for action

Figure 30 Projections of research and development expenditure by source, 2015–16 to
2029–2030
BERD = business expenditure on research and development; GDP = gross domestic product
Notes:
1 Moderate growth scenario: BERD growth in real terms of 8% p.a. from 2018-2030 (33% premium over historical real growth rate 1999–2015)
2 High growth scenario: BERD growth in real terms of 10% p.a. over 2018–30 (66% premium over historical real growth rate 1999–2015)
3 Government expenditure, announced additional spend, and other are assumed to grow in line with GDP, which is forecast to grow at
2.8% p.a.
decade prior to 2008 (which was in turn the BERD increases from just over half of total GERD
fastest decade of growth experienced since in 2016 to approximately two-thirds by 2030
1990) because of:
• government support for innovation, • the 2030 Plan’s expected higher additionality
science and research is assumed to grow to flowing from a greater use of direct grant-
approximately 0.69 per cent of GDP by 2030, support programs in preference to current
with the growth above GDP growth rate being indirect (tax-based) incentives (outlined in
achieved from already announced additional Imperative 2)
government R&D expenditure251 • other measures focused on supporting the
• other sources of R&D expenditure (including growth of knowledge-based and export-
state and territory governments, private not- oriented businesses (Imperatives 2 and 4)
for-profit, and international organisations)
are assumed to grow at the GDP real growth
average of 2.8 per cent.
251 Announced activities include Medical Research Future Fund, Biotechnology Translation Fund, CSIRO Innovation Fund, Defence Next
Generation Technologies Fund, and NISA announced investments in research infrastructure.

• business’ responses to opportunities for Environment and Energy, Immigration and Border
increased participation in government Control, Foreign Affairs and Trade, Attorney
procurement, access to larger and better General, and of course both the Treasury and
curated data sets, and benefit from lower cost Finance. ISA looks forward to working across
service delivery (outlined under Imperative 3). the whole of government in this way to drive a
stronger innovation performance for Australia.
Importantly, the potency of government policy
in driving increased investment by business
will play a large role in determining whether
Australia reaches the upper or lower end of the Measuring performance to
percentage of GDP range. This is why a strong inform effective investment
focus on continuous evaluation and refinement
of all support programs is recommended. ISA recommends implementation of all the
2030 Plan’s 30 recommendations during the
period ending 2022. It envisages full strategic
Implementation reviews of the 2030 Plan in 2022, 2026 and
2030 in addition to annual reporting against
Should the government resolve to implement all progress. Accurate measurement of the
30 of the recommendations from the 2030 Plan, innovation system’s performance is vital to
these will need to be implemented and delivered effective investment in innovation. Well-targeted
across a number of agencies and departments. investment will allow Australia to capitalise on
An interdepartmental committee of key secretaries our strengths, and continue to build them into
or deputy secretaries, similar to that created for the future. Poorly targeted investment risks
the timely roll-out of NISA, could be a suitable wasting money and diminishing Australia’s
implementation control mechanism. The ISA reputation.
Board, through the Office of Innovation and Regular reviews based on outcomes that are
Science Australia, could be resourced to monitor identified in advance of new investments in
and evaluate the delivery and impact of the 2030 government innovation programs will provide
Plan over time. The ISA Board would report on an opportunity to review the effectiveness of
the outcomes of this work, via the Minister for interventions, iterating them as required based
Industry, Innovation and Science, to the Innovation on accumulated evidence, and to respond
and Science Committee of Cabinet, chaired by the to any new developments in the system that
Prime Minister. This would enable an independent will undoubtedly occur. These developments
and expert source of review and oversight with a should be supported through the accumulation
whole-of-government remit. An important feature of a longitudinal evidence base to guide
of this review and advisory role will be ISA’s policy development and long-term program
commitment to report against the innovation improvement.
performance metrics identified in the 2030 Plan.
ISA has developed a common set of metrics that
It is envisaged that a number of ministers and could underpin performance reviews in each
central agencies will wish to be, and need to be, cycle, and inform decisions about the most
engaged with specific recommendations that effective way to invest in Australia’s innovation,
relate to their core portfolio responsibilities. In science and research system in the years ahead
particular, Departments of the Prime Minister (Figure 31).
and Cabinet; Industry, Innovation and Science;
There are multiple indicators and metrics at
and Health would be partners on all imperatives;
the global and national level for measuring
the Department of Education would be a partner
innovation, including data from the Australian
on Imperatives 1 and 4; and the Department of
Bureau of Statistics, the Global Innovation Index
Defence would be a partner on Imperatives 1, 2
and OECD statistics. The data are relied upon by
and 3. Other ministers and departments will also
policy makers to identify areas where Australia
have important impact and carriage, including
can improve its performance, including through

Figure 31 Innovation and Science Australia 2030 Plan scorecard
International
Australia’s latest average top Australia’s
Imperatives score and trend 5 performers ranking
Academic Ranking of World Universities top 200 0.41 (2017) p 0.58 6 of 37

universities, per million population
VET completion rates, % 39.0% (2013) q No

comparable
data
Percentage of population aged 25–64 with STEM at 20.8% (2016) – 31.7% 22 of 24

tertiary level, %
Programme for International Student Assessment

scores
• science 510 (2015) q 538 11 of 38
• reading 503 (2015) q 526 14 of 38
• mathematics 494 (2015) q 539 20 of 38
Business expenditure on research and development, 1.01% (2015) q 2.86% 22 of 36

% of GDP
Number of International patent applications filed by 1.5 (2016) – 8.2 21 of 37

residents at the PCT per billion GDP (PPP)
Total early-stage entrepreneurship activity, % 14.6% (2016) p 17.6% 6 of 28
Venture capital investment, % of GDP 0.013% (2016) q 0.21% 24 of 33
High-growth enterprise rate, measured by 4.8% (2014) q 8.3% 6 of 18

employment growth, %
Percentage of contracts allocated to small and 24% (2016) q No

medium enterprises comparable
data
Government effectiveness index 82.2 (2015) q 14 of 37
E-government index 97.8 (2016) p 97 2 of 36
Gross expenditure on research and development, % 1.88% (2015) q 3.69% 20 of 36

of GDP
Percentage of higher education expenditure on 5.1% (2014) p 17.3% 16 of 31

research and development financed by industry, %
Highly cited publications (top 1% in the world, all 7.3% (2015) p 20.3% 7 of 37
disciplines) per million population, %
Proportion of PCT patents with foreign co-inventors, % 16.4% (2014) q 44.2% 28 of 37
Multifactor productivity change, five year compound 0.74% (2015) p 0.8% 4 of 17

annual growth rate, %
Number of metrics in top quartile 5 of 17
GDP = gross domestic product; OECD = Organisation for Economic Co-operation and Development; PCT = Patent Cooperation Treaty; PPP =
purchasing power parities; STEM = science, technology, engineering and mathematics; VET = vocational education and training
Notes:
1 These metrics have been developed based on a range of resources and research; see Appendix B for details.
2 International comparisons are made between Australia and other OECD+ countries and include all countries in the OECD, as well as China,
Taiwan and Singapore (where data are available).
3 The average for the top five OECD+ countries represents the simple average of the top five OECD+ countries in the given metric.
4 The arrows indicate the direction in the trend for each metric since the previously reported value.

targeted public interventions and investment. Recommendation 30: Support the development
However, a growing body of evidence suggests of a suite of innovation metrics and
these metrics portray Australia in an overly methodologies to fully capture innovation and
negative light. This is because they do not fully link it to economic, social and environmental
capture innovation activity, because data are benefits. In particular:
not collected uniformly across nations included • request the Australian Bureau of Statistics
in international rankings, or in some cases, (ABS) and the Department of Industry,
because the data collected are flawed. Their Innovation and Science (DIIS) to review
utility is also limited because results are too business and research and development data
coarse to provide policy insights. ISA is therefore collections to ensure they are fit for purpose
recommending the use of a scorecard containing and take full advantage of all available data
relevant metrics. sources
To ensure the reviews of progress against the • commission an independent body, such as
2030 Plan draw on robust data, ISA recommends the Australian Academy of Technology and
that the Australian Government invest in Engineering, in consultation with the ABS and
developing a suite of innovation metrics and DIIS, to review existing innovation metrics
methodologies to fully capture innovation and and report on a set of recommended metrics
link it to economic, social and environmental within 18 months, including new innovation
benefits. metrics to track other areas of our innovation
economy with a view to promoting these for
Continued reliance on unsuitable and inaccurate
use by the broader international community.
metrics will drive inappropriate policy
development and lead to less-effective decisions
on whether and how to intervene to accelerate
innovation in Australia.
Recommendations
Recommendation 29: Invest in developing
a more effective framework to evaluate the
performance of Australia in the innovation race
in an effective and timely manner by:
• introducing a requirement that new
government funding programs and policies
aimed at supporting innovation dedicate
approximately 2 per cent of their budget for
the evaluation of outcomes that should be
clearly identified in advance
• tasking the Australian Government
Department of Industry, Innovation and
Science with developing a stronger
longitudinal evidence base for program
effectiveness, to improve the longevity of
high-impact innovation programs, inform
cessation of ineffective programs, and
underpin iterative improvement of all
programs.

Summary of recommendations
Imperative 1 • instilling ‘motivation mindsets’ and a culture

of high expectations including through
Education: Respond to the changing –– communicating to secondary students the
nature of work by equipping all level of school STEM study needed to enter
Australians with skills relevant to and successfully complete STEM-related
courses at university and in vocational
2030 education and training
Recommendation 1: Government education –– reinstating prerequisites into those tertiary
policy makers should direct their efforts towards: courses in which discipline skills are
• investing in quality teaching by improving necessary
the quality and content of in-service teacher • ensuring future reviews of the Australian
professional development programs to Curriculum for STEM subjects will continue
focus on to meet Australia’s innovation, science and
–– a nationally agreed minimum number of research education needs and be informed of
annual hours in discipline-specific training industry expectations through consultation
–– the teaching of 21st-century skills with industry.
–– increasing quality of and emphasis Recommendation 2: Prepare students for
on feedback and appraisal of teacher post-school science, technology, engineering
performance and mathematics (STEM) qualifications and
–– selecting, developing and effectively occupations, by:
resourcing high-performing teachers • exploring opportunities to encourage
and school leaders to act as mentors and participation in higher-level STEM subjects in
instructional leaders in their school or area high school
• monitoring the entry standards for initial • strengthening education in skills such
teacher education courses to ensure that they as hypothesis-driven problem solving,
are sufficiently demanding to select students systematic enquiry and logical thinking
with the literacy and numeracy skills required • improving measurement of the scope of out-
for science, technology, engineering and of-field teaching in STEM and implementing
mathematics (STEM) teaching measures to reduce the level of out-of-field
• strengthening the quality of teacher education teaching
for secondary STEM teachers through • optimising the interaction of industry with
requiring the completion of a discipline- schools through the work of the STEM
specific, non-teaching degree in addition to a Partnership Forum.
teaching degree
Recommendation 3: Improve transparency and
• increasing the system-level focus on targeted
accountability across the system by raising the
interventions to improve outcomes where
ambition of the national minimum standards
student learning levels are significantly below
in the National Assessment Program – Literacy
our national average through
and Numeracy (NAPLAN) and building on these
–– providing tailored support to teachers in
with new standards focusing on higher levels of
the form of regular tracking of student
achievement.
improvement, enabling rapid and evidence-
based iteration of teaching practice

Recommendation 4: Task the Australian
Government Department of Education and
Imperative 2
Training to undertake a review of vocational Industry: Ensure Australia’s
education and training (VET) and report back ongoing prosperity by stimulating
within 12 months on:
high-growth firms and improving
• a strategy to make the sector increasingly productivity
responsive to new priorities presented by
innovation, automation and new technologies Recommendation 6: Adopt as the top priority
• ensuring the Australian VET system will be of innovation policy the reversal of the current
internationally competitive in the provision decline in business expenditure on research and
of initial skills training, in supporting a life of development, with a headline goal of achieving a
learning and helping businesses to compete, medium-term growth rate not less than that seen
and ensuring VET interfaces and intersects in 1999–2015. The contribution to this goal made
productively with other parts of the higher by government support for business R&D should
education system be strengthened by:
• recommendations for metrics of VET success • ensuring, at a minimum, that total government
to be evaluated by 2022, including via surveys support for science, research and innovation
of employers regarding skills relevance, does not fall below its medium-term average
actual completion rates and employment on of 0.63 per cent of gross domestic product
graduation • implementing the recommendations of
• increasing the amount and granularity of the 2016 Review of the R&D Tax Incentive
information made available to students. to improve the effectiveness, integrity and
collaboration impact of the program, with the
Recommendation 5: Continue and expand following adjustments
current VET reforms to:
–– the cap referred to in Recommendation 3 of
• optimise the supply-side potential of the the report should be set at $4 million per
Skilling Australia Fund, for example by year, and a maximum cumulative refund of
encouraging industry employers and VET $40 million per company should be applied
providers to consult with Industry Growth –– the threshold referred to in
Centres in identifying expected skills Recommendation 4 of the report should
shortages in the future work requirements of be replaced with a trigger set at 1 per cent
high-growth sectors of total annual expenditure, such that all
• link VET student loan funding to employment R&D expenditure is claimable (subject to
outcomes any other limits) once the trigger level is
• strengthen the powers of the regulator: reached
Australian Skills Quality Authority • prioritising new and redirected investment
• provide improved information to students on in stimulating business R&D to programs
provider quality. that directly support activity in areas of
competitive strength and strategic priority
(e.g. Cooperative Research Centres – CRCs,
CRC Projects, Entrepreneurs’ Programme and
Industry Growth Centres).

Recommendation 7: Increase efforts to help Recommendation 13: Improve provision and use
young Australian businesses and small and of open government data by:
medium enterprises to access export markets by: • developing government capability and capacity
• increasing funding for Export Market to deliver accessible, accurate and detailed
Development Grants and investigating how to public data, balancing release of data with
target a larger proportion of the funds to high- privacy and intellectual property concerns;
growth businesses (e.g. consider fostering this will entail sustained investment in data
and identifying them via Industry Growth custodianship, maintenance and release
Centres) • developing improved mechanisms
• extending funding for international capability to encourage feedback to originating
promotion through targeted trade missions departments from industry and not-for-profit
and trade promotion activities. user groups to ensure that data released by
governments is maximally useful.
Recommendation 8: The forthcoming Digital
Economy Strategy should prioritise the Recommendation 14: Establish a small and
development of advanced capability in artificial medium enterprise (SME) procurement target
intelligence and machine learning in the of 33 per cent of contracts (by dollar value)
medium- to long-term to ensure growth of the being awarded to Australian SMEs by 2022. The
cyber–physical economy. Australian Government Department of Industry,
Innovation and Science should report on
Recommendation 9: Establish protocols
progress towards this target annually.
(including consumer data rights) for maintaining
healthy levels of competition in knowledge- Recommendation 15: Increase the use
intensive industry sectors. of innovative procurement strategies to
improve outcomes and optimise government
Recommendation 10: Build on strength in
operations by:
accessing overseas talent through continuing
and targeted updates to skilled immigration • establishing programs that promote, track
rules and improved marketing to suitable talent, and report on progress towards procurement
especially through Austrade (with a focus on key practices that drive innovation (including
target markets). identifying impediments raised by industry,
and measuring participation of firms by age
and stage) across all levels of government
Imperative 3 • continuing and potentially expanding the
challenge-based Business Research and
Government: Become a catalyst for Innovation Initiative and Small Business
innovation and be recognised as a Innovation Research for Defence program,
global leader in innovative service and managing their evolution to become
delivery Australian Small Business Innovation
Research equivalents of the successful United
Recommendation 11: The Australian Government States program
should work with states and territories to lead • developing contractual frameworks to
efforts to create a more flexible regulatory facilitate procurement from start-ups and
environment within Australia to foster young firms
innovation, including exploring specific areas
• creating a ‘government as first customer’
for cross-jurisdictional collaborative regulatory
program designed for high-growth firms,
reform.
including start-ups, to be trialled by two of the
Recommendation 12: Further strengthen the major procurement departments before a roll-
policy environment to encourage investors to out across all government departments.
pursue opportunities that provide both social
and financial returns.

Recommendation 16: Maximise the benefit from Recommendation 18: Conduct a review of
nationally significant government programs by the Australian Government Public Service
establishing a framework to identify, predict, with the aim of enabling a greater role and
encourage and evaluate spillover benefits by: capability for innovation in policy development,
• using major Defence programs (such as implementation and service delivery. This work
submarine, continuous ship-building and land complements, and could be connected with, the
combat vehicles programs) as ‘pathfinders’ work of the Secretaries APS Reform Committee.
to establish how government can best define,
deliver and measure broad national value; the
‘pathfinder’ should plan, collect and report Imperative 4
on the data and insights that will help future
governments and policy makers to calculate
Research and development:
and forecast industry and innovation spillover Improve research and development
benefits effectiveness by increasing
• exploring and reporting on how other major translation and commercialisation of
projects and programs (information and research
communications technology, infrastructure)
Recommendation 19: Introduce a collaboration
can be leveraged to deliver increased
premium of up to 20 per cent on non-refundable
innovation and spillover returns and reskill
tax offset to incentivise collaboration (as
the workforce; the Defence Science and
part of implementing the recommendations
Technology Group’s engagement with
of the Review of the R&D Tax Incentive,
innovative companies, including the provision
Recommendation 6 under Imperative 2).
of investments for design and prototyping via
the Next Generation Technology Fund and the Recommendation 20: Evaluate the benefits
Defence Innovation Hub, provides a potential of introducing an industry higher degree by
exemplar. research placement program at greater scale
with long-term support, including assessing
Recommendation 17: Instruct the Digital
the merits of international examples of similar
Transformation Agency to explore opportunities
programs.
to achieve half of the projected 12 per cent of
savings from digitising service delivery by 2022 Recommendation 21: Conduct an expert review
and the balance by 2026, while simultaneously in 2022 to evaluate the effectiveness of recent
improving citizen satisfaction with government changes to incentivise collaboration, and
services. The agency should be resourced to recommend options for further action. The
also: review should cover, at a minimum:
• benchmark and report on the effectiveness • the engagement and impact assessment
and efficiency of the use of digital implemented through the Australian Research
technologies and the improvement of service Council
delivery (using automation, advanced • funding changes following the Review of
analytics and service delivery dashboards to Research Policy and Funding Arrangements,
monitor and evaluate the impact of spending) including to the Linkage Program and
• set a target for citizen satisfaction as part of research block grants
planned assessment of performance against • progress on addressing the findings and
key performance indicators, and track the recommendations of the Review of Australia’s
progress of every department delivering Research Training System
citizen-facing services against it; for • progress on ensuring that university career
example, by considering the adoption of the paths allow for mobility between academia
Service NSW approach to benchmarking and and industry
measurement of satisfaction.
• the recommended collaboration premium
under the R&D Tax Incentive.

Recommendation 22: Increase performance of Australia in the innovation race
commercialisation capability in research in an effective and timely manner by:
organisations by establishing a new stream of • introducing a requirement that new
funding for translational activities. government funding programs and policies
Recommendation 23: Develop and release an aimed at supporting innovation dedicate
Australian Innovation Precincts Statement to approximately 2 per cent of their budget for
shape Australian Government involvement in the evaluation of outcomes that should be
emerging localised innovation ecosystems in clearly identified in advance
cities and regions. • tasking the Australian Government
Department of Industry, Innovation and
Recommendation 24: Establish secure, long-
Science with developing a stronger
term funding for national research infrastructure,
longitudinal evidence base for program
in accordance with the recommendations of the
effectiveness, to improve the longevity of
2016 National Research Infrastructure Roadmap.
high-impact innovation programs, inform
Recommendation 25: Maintain a long-term cessation of ineffective programs, and
policy commitment to achieving greater gender underpin iterative improvement of all
diversity in the science, technology, engineering programs.
and mathematics workforce, including by raising
Recommendation 30: Support the development
awareness of gender diversity in government
of a suite of innovation metrics and
programs.
methodologies to fully capture innovation and
Recommendation 26: Task Innovation and link it to economic, social and environmental
Science Australia to monitor emerging sectors of benefits. In particular:
high growth in the economy and report annually • request the Australian Bureau of Statistics
to the Australian Government on the adequacy of (ABS) and the Department of Industry,
risk capital supply. Innovation and Science (DIIS) to review
business and research and development data
collections to ensure they are fit for purpose
Imperative 5 and take full advantage of all available data
sources
Culture and ambition: Enhance
the national culture of innovation • commission an independent body, such as
the Australian Academy of Technology and
by launching ambitious National
Engineering, in consultation with the ABS and
Missions DIIS, to review existing innovation metrics
Recommendation 27: Establish a National and report on a set of recommended metrics
Mission to help make Australia the healthiest within 18 months, including new innovation
nation on Earth, with a step-change investment metrics to track other areas of our innovation
in our national genomics and personalised economy with a view to promoting these for
medicine capability and its integration into our use by the broader international community.
medical research and healthcare system.
Recommendation 28: Adopt a framework to
continue to identify and implement additional
National Missions.
Roadmap for action

Recommendation 29: Invest in developing
a more effective framework to evaluate the

106
Appendices
APPENDIX A:
Other National Mission candidates
National Mission candidate 2: at scale. Core areas of focus will be interventions

and technologies that can:
Restore the Reef • reduce exposure to, and impacts of,
This mission will deliver the world’s largest reef disturbance, via next-generation corals for
restoration and eco-engineering program to tomorrow’s reefs (for example, translocating
ensure the survival and adaptation of the Great existing corals with elevated temperature
Barrier Reef (GBR) beyond 2030. resistance, selective breeding and assisting
migration, gene modification, cryo-banking)
The GBR is a global icon and important
• increase recovery after disturbance (for
environmental habitat, bringing in an estimated
example, from coral bleaching, crown-of-
$6.4 billion each year to the economy and
thorns starfish outbreaks, or cyclones)
supporting 64,000 full-time jobs.252 The GBR
is under increasing pressure from a range of • enable an effective ‘toolkit’ to be developed
stressors, including bleaching caused by rising for adaptation and restoration of the reef, and
ocean temperatures, poor water quality caused reefs around the world.
by adjacent land use, marine pollution, crown- This mission will build on Australia’s world-
of-thorns starfish, over-exploitation, cyclone leading science capability and marine research
damage and ocean acidification. Recent global infrastructure, particularly in tropical marine
bleaching events are estimated to have killed sciences. The program of work will leverage
around 50 per cent of coral in the reef.253 existing and new IP to facilitate the creation of
Australia has made substantial forward new products, start-ups, and niche industries
commitments to the GBR, including the Reef in areas such as coral nurseries, aquaculture
2050 Plan, which provides a strong base for this and aquarium technology, bioactive surfaces,
mission. The Reef 2050 Plan is primarily focused bio-materials, 3D printers, autonomous reef
on managing direct threats (e.g. crown-of-thorns inspection devices and sensors.
starfish and land-based run-offs). It does not A full risk assessment of the mission, considering
have an explicit climate adaptation strategy and scale, cost, intervention and technology
is therefore insufficient to safeguard the reef development risks, would be conducted during a
beyond 2030. The national mission proposed 12-month design and validation phase.
herein will complement the Reef 2050 Plan’s
Financing may require approximately
emphasis on threat reduction by introducing a
$500 million over 10 years and require
targeted restoration and adaptation strategy.
cooperation between the Australian and state
This mission’s aim is to develop a capability for and territory governments, the private sector and
cost-effective restoration of the reef in portions philanthropists.
252 Deloitte Access Economics 2017, At what price? The economic, social and icon value of the Great Barrier Reef, Deloitte Access
Economics, <https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-economics-great-barrier-
reef-230617.pdf>.
253 Deloitte Access Economics 2017, At what price? The economic, social and icon value of the Great Barrier Reef, Deloitte Access
Economics, <https://www2.deloitte.com/content/dam/Deloitte/au/Documents/Economics/deloitte-au-economics-great-barrier-
reef-230617.pdf>.
108 Appendices
National Mission candidate 3: Technology improvements driven by the large-
scale deployment of hydrogen production
Hydrogen City technologies, gas network upgrades and
hydrogen consumption appliances, optimised
This mission will demonstrate that an entire city
in collaboration with research organisations,
could have its reticulated gas distribution system
will allow Australia to take a leadership position
converted to clean hydrogen by 2030.
in the field. This in turn will create export
The electricity sector is the largest source of opportunities for both the technology and
greenhouse gas emissions. The next three related expertise.
sectors, of similar size to each other, are direct
Financing for the project will be joint between
combustion, transport and agriculture. The
the Australian, state and territory, and local
hydrogen city mission will demonstrate deep
governments and the private sector. Total
emissions reduction in the direct-combustion
investment to meet the project scope is
sector.
estimated to be around $500 million over
The gas network, all space heating, cooking 10 years combining public and private funding,
appliances, and industrial thermal processes will though given the substantial number of
be converted to run on pure hydrogen. Facilities assumptions a more detailed costings exercise
could be provided to supply hydrogen to public and comparison to alternatives, such as full
transport and other heavy-use vehicle fleets. electrification, is needed.
The energy used to produce the hydrogen will be
electrical energy from zero emissions sources
such as solar, wind or hydro. The electricity
will be used to split water into hydrogen and
oxygen. This has never been done at the scale
contemplated in this mission.
The project will test the feasibility of hydrogen
as an energy source. The practical challenges
around technology deployment, cost reduction,
regulation and public engagement at scale in
an existing urban environment have never been
approached; by taking this project through to
full implementation these challenges will be
thoroughly addressed.
The project will also consider how innovative
technology can be deployed in a standardised
way and produced in volume to ensure
that energy security and long-term cost
competitiveness will not be compromised.
While hydrogen has been safely transported in
pipelines across the United States and Europe
for decades without incident, evaluating the
safety aspects of this proposal will be a critically
important early step in the planning of the
project. Safety aspects will need to be openly
and clearly shared with the local community
and confidence earned before the project can
proceed.
Appendices 109
APPENDIX B:
Definitions and sources for the scorecard metrics
Table 2 Sources for Innovation and Science Australia innovation scorecard metrics
Imperative Metric Definition Source
Academic The score is calculated by dividing the Academic Ranking of World

Ranking of World number of universities in the top 200 of the Universities <http://www.
Universities top Academic Ranking of World Universities by shanghairanking.com/ARWU2017.
200 universities, the country’s current population. Country html>
per million populations are obtained from the Global World Intellectual Property
population Innovation Index. Organization, Cornell University,
INSEAD: Global Innovation Index
<http://www.wipo.int/publications/
en/details.jsp?id=4064>
Vocational This measures the completion rates for National Centre for Vocational
education government-funded vocational education Education Research data
and training and training programs at Certificate 1 and <https://www.ncver.edu.au/
completion rates above. search-results?collection=ncver-
data&scope=all-data/,-
fbs&query=&sort=dmetaM&meta_z_
sand=true>
Percentage of This is the percentage of STEM fields OECD Statistics: Education

population aged of study among tertiary-educated and training, Education at a
25–64 with 25–64-year-old adults. STEM comprises glance: Educational attainment
STEM at tertiary the ISCED-F 2013 fields of natural sciences, and labour-force status table
level, % mathematics and statistics, information <http://stats.oecd.org/>; Education
and communication technologies, at a Glance 2017: OECD indicators
and engineering, manufacturing and <https://www.hm.ee/sites/default/
construction. files/eag2017_eng.pdf>
Programme for PISA is a triennial international survey OECD: PISA <http://www.oecd.org/

International that aims to evaluate education systems pisa/>
Student worldwide by testing the skills and
Assessment knowledge of 15-year-old students. The
(PISA) scores in metric highlights current performance in
science, reading, science, mathematics and reading.
mathematics
continued
110 Appendices
Table 2 (continued)
Business This is the total intramural expenditure ABS Research and Experimental
expenditure on R&D by businesses, measured as a Development, Cat. No. 8104.0 <http://
on research & percentage of national GDP. abs.gov.au/AUSSTATS/abs@.nsf/all
development primarymainfeatures/17EF02A5029
(BERD), % of GDP 649E2CA257F990030EDFE?opendoc
ument>
OECD Main Science and Technology
Indicators, BERD as a percentage of
GDP table <http://stats.oecd.org/>
Number of This shows the number of patents filed by World Intellectual Property
international national residents under the the PCT, per Organization, Cornell University,
patent billion dollars of GDP adjusted by PPP. The INSEAD: Global Innovation Index
applications nationality of the first-named applicant on Analysis, PCT international
filed by residents the patent determines the origin of the PCT applications by origin <https://www.
at the PCT per application. globalinnovationindex.org/analysis-
billion GDP (PPP) indicator>
Total early-stage This measures the percentage of the Global Entrepreneurship Monitor:
entrepreneurship population aged between 18 and 64 who Adult population survey measures:
activity, % are in the process of starting a venture and total early-stage entrepreneurial
those who are running a business that is activity <http://www.gemconsortium.
less than 3.5 years old. org/data/key-indicators>
Venture capital This measures the annual amount of equity OECD: Entrepreneurship at a
investment, % investments made to support the pre-seed, glance <http://www.oecd.org/std/
GDP seed, start-up and early expansion stages business-stats/entrepreneurship-at-a-
of business development, measured as a glance-22266941.htm>
percentage of national GDP.
High-growth This shows the percentage of firms that OECD Statistics, SDBS Business
enterprise rate, meet the criteria for high growth within Demography Indicators (ISIC REV.4):
measured by the business economy. In this metric, Rate of high-growth enterprise.
employment high growth is defined by employment Data on HE_R-Rate of high-growth
growth, % growth. High-growth firms have an average enterprises (20% growth based on
annualised growth of over 20% per year employment: <http://stats.oecd.org/>
over a 3-year period, and had 10 or ABS 2017: Business longitudinal
more employees at the beginning of the analysis data environment
observation period. (BLADE); Customised data analysis
commissioned by the Department of
Industry, Innovation and Science.
continued
Appendices 111
Table 2 (continued)
Percentage This takes data on procurement contracts Australian Government Department

of contracts with SME participation presented and of Finance: Statistics on Australian
allocated to SMEs aggregates it with information extracted Government procurement
from AusTender. The metric reflects contracts <http://www.finance.
contractual information reported during gov.au/procurement/statistics-
the relevant financial year in accordance on-commonwealth-purchasing-
with entities’ procurement publishing contracts/>
obligations, and does not represent actual
expenditure.
Government This is an index that reflects perceptions of World Intellectual Property

effectiveness the quality of public services, the quality Organization, Cornell University,
index of the civil service and the degree of its INSEAD: Section 1.1.2 Government
independence from political pressures, effectiveness <https://www.
the quality of policy formulation and globalinnovationindex.org/analysis-
implementation, and the credibility of the indicator>
government’s commitment to such policies.
Scores are standardised.
E-government This assesses government online services World Intellectual Property

index including the national portal, e-services Organization, Cornell University,
portal and e-participation portal, as well INSEAD: Section 3.1.3 Government
as the websites of the related ministries of online services <https://www.
education, labour, social services, health, globalinnovationindex.org/analysis-
finance and environment, as applicable. indicator>
Gross GERD is the total national intramural ABS Research and Experimental
expenditure expenditure on R&D, as a percentage of Development, cat. no. 8104.0
on research & GDP. This represents expenditure devoted to OECD: Main science and technology
development R&D by the business, government, private indicators <https://stats.oecd.org/
(GERD), % of GDP non-profit and higher education sectors. Index.aspx?DataSetCode=MSTI_PUB>
Percentage of This is the proportion of the higher ABS Research and Experimental
Higher education education sector’s total intramural Development, cat. no. 8111.0
expenditure on expenditure on R&D which is financed by OECD: Main science and technology
research and business. indicators <https://stats.oecd.org/
development Index.aspx?DataSetCode=MSTI_PUB >
financed by
industry, %
Highly cited This metric shows the percentage of InCites: Thomson Reuters Web of
publications (top publications in the world’s top 1% of highly Science database <https://incites.
1% in the world, cited publications that have at least one thomsonreuters.com/>
all disciplines) domestic author, measured per million OECD: Main science and technology
per million people in the domestic population. indicators <http://stats.oecd.org/
population, % Index.aspx?DatasetCode=PATS_COOP>
Proportion of This metric shows the percentage of patents OECD: International cooperation in
PCT patents filed at the PCT that have a domestic patents <https://stats.oecd.org/Index.
with foreign co- inventor or inventors and at least one other aspx?DataSetCode=PATS_COOP>
inventors, % foreign inventor.
continued
112 Appendices
Table 2 (continued)
Multifactor MFP measures the changes in output per OECD: Multifactor productivity
productivity unit of combined inputs of labour and <https://data.oecd.org/lprdty/
change, five capital. The change or growth in MFP is multifactor-productivity.htm>
year compound measured as a 5-year compound annual
annual growth growth rate.
rate, %
Number of The number of metrics out of the 17 metrics

metrics in top with international comparisons where
quartile Australia’s ranking is in the top 25% of the
total countries for that metric.
ABS = Australian Bureau of Statistics; BERD= business expenditure on research and development; GDP = gross domestic product;
MFP = multifactor productivity; OECD = Organisation for Economic Co-operation and Development; PCT = Patent Cooperation Treaty;
PPP = purchasing power parities; PISA = Programme for International Student Assessment; R&D = research and development;
STEM = science, technology, engineering and mathematics
Appendices 113
Acronyms, abbreviations and glossary
Term Definition
AI artificial intelligence
Computer systems that are able to perform tasks normally requiring human intelligence
BERD business expenditure on research and development

Intramural expenditure by businesses on creative and systematic work undertaken to increase knowledge
or to devise new applications of available knowledge
COAG Council of Australian Governments
CRC Cooperative Research Centre
GDP gross domestic product
GERD gross expenditure on research and development

Constructed by adding together the research and development expenditures of four sectors: business,
government, higher education, and private non-profit
GOVERD government expenditure on research and development

Intramural expenditure towards activities aimed at increasing knowledge or applying knowledge in
new ways from all units of the Australian Government (excluding local governments, higher education
institutions and government entities involved in market production or financial activities) and all
organisations that are mainly financed by and operate for those government units
GVA gross value add
HASS humanities, arts and social sciences
HDR higher degree by research
HEIF Higher Education Innovation Fund, United Kingdom
HERD higher education expenditure on research and development

Intramural expenditure on creative and systematic work undertaken to increase knowledge or to devise
new applications of available knowledge by universities and other institutions of post-secondary education
regardless of their source of finance or legal status
ICT information and communications technology
IGC Industry Growth Centre
Incubator A place where start-up companies share their workspaces to benefit from mentorship and peer learning
Innovation Fresh thinking that creates value
IP intellectual property
Intangible property that is the result of creativity, such as a patent, copyright or trade secret
ISA Innovation and Science Australia
ML machine learning
Where systems can automatically learn and improve from experience without being explicitly programmed
NAPLAN National Assessment Program – Literacy and Numeracy
NISA National Innovation and Science Agenda
OECD Organisation for Economic Co-operation and Development
Open data A philosophy that promotes transparency, accountability and value creation by making data available to all
114
Term Definition
Out-of-field Education delivered by teachers in an area for which they are not certified or do not possess an academic
teaching major at second year level or above
PISA Programme for International Student Assessment

A worldwide study by OECD that measures academic performance
R&D research and development

Creative work undertaken on a systematic basis to increase the stock of knowledge, and subsequently
using this stock of knowledge to devise new applications
R&DTI Research and Development Tax Incentive
SBIR Small Business Innovation Research program (United States)
SBRI Small Business Research Initiative (United Kingdom)
SII social impact investment
SME small and medium enterprise
STEM science, technology, engineering and mathematics
Venture capital High-risk private equity capital for typically new, innovative or fast-growing unlisted companies
VET vocational education and training
115
Acknowledgements
ISA wishes to thank the hundreds of people who (President and Chief Executive, GE Australia,
contributed to this process through consultation, New Zealand and Papua New Guinea), Glyn Davis
submissions and interviews. We acknowledge (Vice-Chancellor, University of Melbourne),
the support of our consultants and service Nick Davis (Head of Society and Innovation,
providers from Howard Partners and McKinsey & World Economic Forum), Alison Deans (Director,
Co, and also the provision of a secondee from GE Westpac), Jane den Hollander (Vice-Chancellor,
Australia for part of the project. Deakin University), Maureen Dougherty
(President, Boeing Australia, New Zealand
ISA also wishes to acknowledge the excellent
and South Pacific), Yasser El-Ansary (Chief
contributions made by the secondees into the
Executive, AVCAL), Jackie Fairley (CEO,
ISA Taskforce: Todd Mansell, Pru Glasson, Kristin
Starpharma), Roy Green (former Dean, School
Milton, Laura Dan, Marty Hazelwood, David
of Business, University of Technology, Sydney),
Crook, Karen Jackson, Rachel White, Zoe Piper,
Ken Henry (Chairman, NAB), Doug Hilton
Bernard Borg-Caruana and Annika Barton. We
(Director, WEHI), Leigh Jasper (CEO, Aconex),
also thank the team in the Office of Innovation
Chris Jenkins (CEO, Thales), Tim Kelsey (CEO,
and Science Australia: Mahmoud Alinejad, Clare
Australian Digital Health Agency), Sally Kift
Barrett, Lisa Blake, Melissa Daniels, Mardi Davis,
(former Deputy Vice-Chancellor, James Cook
Michelle Denison-Edson, Rose Filipovic, Julia
University), Beau Leese (Co-founder and
Freeman, Mark Looney, Dani Polmanteer, Tim
Co-CEO, Intersective), Larry Marshall (Chief
Powell, Elice Stanley, Gillian Treloar and Deb
Executive, CSIRO), Alex McCauley (CEO,
Willimott.
StartupAUS) Chris Nave (Managing Director,
We acknowledge the generous time provided Brandon Capital), John Rosenberg (Box Hill
by our Expert Reference Group, whose strategic Institute Board), Niki Scevak (Partner, Blackbird
insights have proved invaluable: Ventures), Anna Skarbek (CEO, ClimateWorks),
Michael Aitken (CEO, Capital Markets CRC), Adrian Turner (CEO, Data61), Ian Watt (former
Angus Armour (CEO of AICD), Richard Bolt Secretary, PM&C), Cynthia Whelan (Chairperson,
(Secretary, Department of Economic Foxtel Board), Innes Willox (Chief Executive,
Development, Jobs, Transport & Resources, Australian Industry Group), Kee Wong (Managing
Vic Govt), James Cameron (Partner, Airtree Director/Principal, e-Centric innovations).
Ventures), Georgie Carnegie (Sentient ISA notes that, although we have benefited
Group), Megan Clark (Bank of America Merrill from the input of many as outlined above, final
Lynch), Jeff Connolly (CEO, Siemens Pacific), responsibility for the content of the 2030 Plan
Kate Cornick (CEO, LaunchVic), Geoff Culbert rests with the board.
116

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Australia 2030

A plan for Australia to thrive in the

A plan for Australia to thrive in the

many inventions; the black box flight recorder,

3 McCrindle 2014, Job mobility in Australia, McCrindle, Sydney,

R&D = research and development

Imperatives Strategic opportunities for government Recommendations

Education • Teaching of science, technology, engineering and mathematics 1 to 5

Industry • Business research and development investment can be increased 6 to 10

Government • A flexible regulatory environment that supports innovation could be 11 to 18

Research & • Industry–research sector collaboration could be increased 19 to 26

Culture & • A Genomics and Precision Medicine National Mission will be an 27 to 30

Innovation and Science Australia’s Australia in 2017

8 Section A: Australia’s innovation opportunity

Section A: Australia’s innovation opportunity 9

10 Section A: Australia’s innovation opportunity

FTE = full-time equivalent

Section A: Australia’s innovation opportunity 11

Source: AlphaBeta 2017, The automation advantage, AlphaBeta, Sydney, <http://www.alphabeta.com/the-automation-advantage>.

12 Section A: Australia’s innovation opportunity

Section A: Australia’s innovation opportunity 13

14 Section A: Australia’s innovation opportunity

Section A: Australia’s innovation opportunity 15

16 Section A: Australia’s innovation opportunity

GDP = gross domestic product; R&D = research and development

Figure 8 Global investments in artificial intelligence, 2016

Section A: Australia’s innovation opportunity 17

18 Section A: Australia’s innovation opportunity

Section A: Australia’s innovation opportunity 19

20 Section A: Australia’s innovation opportunity

Section A: Australia’s innovation opportunity 21

22 Section A: Australia’s innovation opportunity

R&D = research and development

Section A: Australia’s innovation opportunity 23

ISA’s vision is that Australia has • Strategic opportunity 1.2: Australia’s

Strategic opportunities for

26 Section B: Five imperatives for action

51 Productivity Commission 2016, Report on government services 2016, PC, Canberra,

Section B: Five imperatives for action 27

PISA = Programme for International Student Assessment

28 Section B: Five imperatives for action

Section B: Five imperatives for action 29

30 Section B: Five imperatives for action

74 R. Randall, CEO of ACARA, Personal Communication.

Section B: Five imperatives for action 31

32 Section B: Five imperatives for action

Section B: Five imperatives for action 33

34 Section B: Five imperatives for action

GDP = gross domestic product

Section B: Five imperatives for action 35

36 Section B: Five imperatives for action

Section B: Five imperatives for action 37

ISA’s vision is that by 2030 • Strategic opportunity 2.3: The opportunities

38 Section B: Five imperatives for action

Section B: Five imperatives for action 39

Figure 13 Australian Government science, research and innovation expenditure, 2016–17

40 Section B: Five imperatives for action

Section B: Five imperatives for action 41

42 Section B: Five imperatives for action

Section B: Five imperatives for action 43

44 Section B: Five imperatives for action

Section B: Five imperatives for action 45

46 Section B: Five imperatives for action